The Securing a Strong Retirement Act of 2022 was introduced to address what its key sponsors called “a retirement crisis.” Acknowledging the disheartening state of retirement readiness in the US, where 40 percent of adults don’t have any money invested in retirement savings, the law sought to make it easier to establish strategies that would provide adequate retirement income.
The law, signed by President Joe Biden in December 2022, is commonly known as SECURE 2.0 because it builds on provisions introduced under the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act. Its provisions address a wide variety of retirement issues, ranging from required minimum distributions to emergency withdrawals to student loan payments, with some of its key provisions taking effect in 2025.
The following are some thoughts for financial advisors on how the act’s provisions may impact their clients’ planning, along with suggested steps for guiding clients in the new investment landscape.
The majority of Americans feel they have fallen behind on their retirement savings, which makes the catch-up contributions permitted under law extremely valuable. Under SECURE 2.0, Americans will be able to increase those contributions.
The act states that the $1,000 IRA catch-up limit for individuals 50 and older will be indexed for inflation, effective beginning in 2024. For those between the ages of 60 and 63, the limit for catch-up contributions to employer-sponsored plans increased in 2025 to $10,000 or 150% of the regulatory catch-up limit, whichever is larger.
Another provision of the act requires those earning more than $145,000 in the prior year — an amount that is indexed for inflation — to make catch-up contributions to Roth 401(k) accounts. This component of the rule, which takes effect in 2026, is designed to prevent high earners from avoiding taxes.
Advisors should carefully consider how the shift in catch-up contribution provisions could affect retirement strategies that were mapped out prior to the act’s passage. Clients should be made aware of how taking advantage of the new limits could improve the value of their accounts. Additionally, high earners with Roth 401(k) accounts should now determine if they’ll need to make adjustments to optimize their accounts once the 2026 requirements take effect.
Strategic tax planning is one of the key services financial advisors offer to their clients. Tax-deferred growth is often a central component of these strategies.
SECURE 2.0 helps with tax-deferred growth by increasing the age at which individuals are required to begin taking distributions from traditional IRAs and employer-sponsored accounts. The act changes the age when required minimum distributions (RMDs) kick in from 72 to 73, with a further increase to 75 set to take effect in 2033.
Advisors should provide guidance to clients on how to maximize earning potential under the change. This can involve updating projections to show how a longer growth period will ultimately impact account values. It can also include exploring tax bracket possibilities to advise on whether or not taking advantage of delayed distributions would be beneficial.
Additionally, clients should be made aware that the act eliminates the RMD rules for Roth 401(k) accounts. This new provision is a considerable change for clients with those accounts who want more time for tax-deferred growth and could trigger significant changes to retirement strategies.
In 1996, the United States created 529 plans to provide tax benefits to individuals saving for college. While the plans are beneficial for those anticipating tuition expenses, they can become problematic if college plans don’t pan out or if the accounts are inadvertently overfunded. SECURE 2.0 makes 529 plans less risky by allowing them to be rolled over into a Roth IRA without penalties.
Financial advisors can take a number of steps to ensure their clients take advantage of the new 529 rules, including identifying clients who may be eligible and explaining the benefits. Integrating the transition into the client’s broader retirement strategy in the most efficient way, which may involve coordinating with their tax planning, is key.
Studies show emergency savings are rare for Americans, with 40 percent reporting they couldn’t cover a $1,000 unexpected expense. SECURE 2.0 aims to address this issue by allowing a penalty-free $1,000 early withdrawal from retirement accounts each year.
The provision makes retirement savings more accessible by eliminating the 10 percent penalty that was previously applied to such withdrawals. It also provides an alternative to high-interest debt, which is a typical go-to for those without emergency savings.
Advisors can help their clients by ensuring they are aware of this new option and explaining the situations in which it may be applicable. They can also help to explain how repaying the amount withdrawn to the retirement account, which can be done within three years, would affect their retirement earnings.
SECURE 2.0 introduces several new provisions that investors can utilize to enhance their retirement income. Financial advisors can serve their clients by ensuring they understand what those provisions entail, the unique benefits they can offer, and how to utilize them effectively.
Aaron Cirksena, founder and CEO of MDRN Capital has devoted his entire career since 2011 to financial planning, distribution planning, and managing client money. He first worked with multiple $1 billion teams at Morgan Stanley and independent firms, and eventually created his own independent services firm in MDRN Capital.
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