The SECURE Act 2.0 is set to introduce significant updates to retirement savings starting in 2025, making it easier for Americans to prepare for the future.
The legislation, passed in 2022, builds on the original SECURE Act from 2019 by adding new rules for 401(k) plans, catch-up contributions, and Roth accounts. Some provisions are already in place, while others will roll out through 2027, Forbes reported.
A significant change in 2025 is automatic 401(k) enrollment for new employees.
Companies that establish plans after December 2022 must enroll workers at a contribution rate of 3% to 10%, with automatic annual increases until contributions reach at least 10%. Employees can opt-out, but the default enrollment aims to boost retirement savings for those who might not actively sign up.
Catch-up contributions will also see adjustments.
The annual contribution limit for employees aged 60 to 63 will increase to $10,000, adjusted for inflation. However, starting in 2026, workers earning over $145,000 will need to direct these extra contributions into Roth (after-tax) accounts, reducing their upfront tax benefits, Kiplinger reported.
Roth accounts will gain new flexibility under SECURE 2.0.
Beginning in 2024, Roth 401(k) plans will no longer require mandatory withdrawals, aligning them with Roth IRAs. This change allows retirees to keep their savings growing tax-free for longer, providing greater control over their financial planning.
Student loan borrowers will also benefit.
From 2024, employers can match student loan payments with contributions to employees’ retirement accounts, even if the employee isn’t actively contributing to the plan. This feature aims to help workers avoid missing out on retirement savings while focusing on paying down debt.
Additional provisions will make accessing savings easier during emergencies. For example, starting in 2024, individuals can withdraw up to $1,000 penalty-free for urgent expenses, with the option to repay the amount within three years. The law also allows larger withdrawals for victims of domestic violence or those affected by natural disasters.
This article was written with assistance from artificial intelligence.