Retirement planning has never been more critical than it is today. As people live longer and Social Security may not be enough to cover their expenses during retirement, it’s essential to have robust retirement savings in place. The SECURE Act 2.0, signed into law in December 2022, is a significant piece of legislation designed to enhance retirement savings opportunities for both employers and employees. In this blog post, we’ll explore the key provisions of the SECURE Act 2.0, focusing on the benefits it brings to both sides of the employment equation.
Key Secure Act 2.0 Provisions
1. Enhanced Catch-Up Contributions
Starting in 2025, the SECURE Act 2.0 allows employees aged 60 to 63 to increase their catch-up contributions to retirement accounts. While the previous limit for catch-up contributions was $6,500, this new legislation will allow these individuals to contribute up to $10,000 per year. This change provides employees with a unique opportunity to boost their retirement savings during the crucial years leading up to retirement.
2. Roth Account Requirements
Beginning in 2026, employees who earned more than $145,000 in the previous year will be required to make all catch-up contributions to a Roth account in the following year. While this ensures a tax-free withdrawal during retirement, it also presents a challenge for payroll systems, which will need to adapt to this new requirement.