News & Advice

Are you saving for retirement? The passage of the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act will impact your retirement savings this year. 

Part of the federal government’s 2022 budget Omnibus Bill, the SECURE 2.0 Act 

was passed in late 2022. It established a new set of provisions that impact retirement accounts. While some changes went into effect immediately this year, other provisions won’t take effect for years to come. 

Here’s how changes in the SECURE Act impact your retirement savings in 2023. 

STARTING AGE FOR RMDs HAS BEEN RAISED

As of the beginning of 2023, the age that determines when you must begin taking required minimum distributions (RMDs) from tax-deferred retirement accounts — traditional IRAs and workplace 401(k) retirement plans — increased from 72 to 73. That means your money can keep growing in your tax-deferred account for an extra year. 

NEW LIMITS FOR QLACs 

The original SECURE Act (2019) limited the tax-deferred investments into a Qualified Longevity Annuity Contract (QLAC) to $125,000 or 25% of the account if lower. QLACs are deferred annuities that are funded by an investment from a retirement plan or account, like an IRA. With the passage of the SECURE 2.0 Act, the maximum QLAC is now $200,000 with no percentage of savings limit. So, you can defer more taxes or buy more retirement income from your tax-qualified retirement accounts. 

HIGHER CATCH-UP CONTRIBUTIONS 

If you’re getting closer to retirement age but your account doesn’t have as much money as you need, that’s what catch-up contributions are for. If you’re 50 or older in 2023, your annual catch-up contribution can now be up to $7,500, up from $6,500 in 2022. 

SMALLER PENALTIES FOR MISSED REQUIRED MINIMUM DISTRIBUTIONS 

The penalty for not taking RMDs has been cut in half. The penalty is now 25% of the undistributed amount instead of the previous 50%. If you have a traditional IRA, the penalty is now 10% if the mistake is corrected during a two-year correction window.

MORE CHANGES TO COME 

While those impact your retirement savings in 2023, more changes are to come. Some of these changes include:

• Starting in 2024, employers can make contributions to workplace savings plans on behalf of employees who are still repaying student loans. 

• In 2024, you won’t have to take the required minimum distributions from Roth 401(k)s and Roth 403(b)s. 

• In 2025, your employer must automatically enroll you in a retirement plan. You’ll still have the option to opt out, but you won’t have to do the work of signing up and enrolling yourself. 

OPEN A RETIREMENT ACCOUNT WITH INOVA

At INOVA Federal, we can help you prepare for retirement with our Individual Retirement Accounts. With traditional and Roth IRA options, no monthly or annual service charges, tax advantages, and more perks, your financial goals are within reach. 

Stop in and see us at one of our convenient locations, or visit us online to learn more about why saving now matters so much for your future.