The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, signed into law in late 2022, introduced numerous changes designed to enhance retirement savings opportunities. With several provisions already in effect, a few more are set to roll out in 2025, bringing significant benefits, particularly for older Americans. As a financial planner, understanding these updates can help you guide your clients toward smarter retirement decisions. Let’s explore the key changes coming in 2025, as well as updates that are already making an impact and what lies further ahead.
Key SECURE Act 2.0 Changes Coming in 2025
Expanding Automatic Enrollment and Escalation
Starting in 2025, employers offering new 401(k) and 403(b) plans will be required to automatically enroll employees at a contribution rate of 3% to 10% of their pay. Additionally, these plans must feature automatic escalation, increasing contributions by 1% annually until they reach between 10% and 15% of compensation.
Tip for Financial Planners: Encourage your clients who are business owners to review their retirement plan offerings and prepare for these requirements. For employees, emphasize the importance of taking full advantage of automatic enrollment and escalation to grow their savings.
Increased Catch-Up Contributions
Beginning in 2025, individuals aged 60 to 63 will benefit from higher catch-up contribution limits for their retirement accounts. For the 2025 tax year, eligible taxpayers can contribute up to $11,250—an amount indexed for inflation—making it easier for those nearing retirement to maximize their savings.
Tip for Financial Planners: Help clients in this age group plan their contributions strategically. Highlight how these increased limits can accelerate their savings in the final stretch before retirement.
Looking Further Ahead
Saver’s Credit Becomes a Federal Match
Effective in 2027, the current Saver’s Credit will transition into a federal matching contribution for lower- and middle-income workers. This change transforms the credit into a direct incentive, further encouraging retirement savings for those who need it most.
Tip for Financial Planners: Educate eligible clients about this shift and work with them to optimize their retirement savings strategies, ensuring they take full advantage of the match.
SECURE Act 2.0 Provisions Already in Effect
Increased Age for Required Minimum Distributions (RMDs)
As of 2023, the age at which individuals must start taking RMDs increased from 72 to 73 for those born after 1950. For example, a person born in 1951 can delay their first RMD until 2024 and has until April 1, 2025, to take it. This age will rise to 75 starting in 2034, according to proposed IRS regulations. Additionally, the excise tax for missed or insufficient RMDs dropped from 50% to 25% in 2023, providing some relief for retirees.
Tip for Financial Planners: Review your clients’ retirement income plans to incorporate these changes. Delaying RMDs may provide opportunities to execute tax-efficient strategies, such as Roth conversions or managing taxable income.
Emergency Withdrawals Without Penalties
Effective in 2024, individuals under 59½ can withdraw up to $1,000 for unforeseen personal or family emergencies without incurring the 10% early withdrawal penalty. This provision includes conditions to ensure responsible use, such as limiting the frequency of such withdrawals.
Tip for Financial Planners: Advise clients to treat this as a last-resort option. Discuss setting up emergency funds outside of retirement accounts to avoid tapping into long-term savings.
Roth Enhancements
Several Roth-related updates came into effect in 2024:
- Roth distributions from 401(k), 403(b), and governmental 457(b) plans are no longer subject to RMD rules, aligning them with Roth IRAs.
- Employers now have the option to make Roth matching or nonelective contributions, providing more flexibility in retirement plan designs.
Tip for Financial Planners: Highlight the benefits of Roth accounts to your clients, particularly for those looking to minimize taxable income in retirement. For business-owner clients, consider revisiting plan designs to incorporate Roth matching contributions.
529 Plan to Roth IRA Rollovers
Beneficiaries of 529 education savings accounts can now roll over unused funds to a Roth IRA under specific conditions. These rollovers are subject to the annual Roth contribution limit and a lifetime cap of $35,000, allowing families to repurpose leftover education savings for retirement.
Tip for Financial Planners: Help clients evaluate whether this strategy aligns with their financial goals. Ensure they meet eligibility requirements and structure rollovers to maximize the benefits.
What These Changes Mean for You and Your Clients
The SECURE Act 2.0’s provisions are designed to enhance financial security by making it easier for Americans to save for retirement, adapt to changing needs, and reduce tax penalties. As a financial planner, staying informed about these updates enables you to provide tailored guidance to your clients.
Whether it’s advising on catch-up contributions, RMD strategies, or leveraging Roth accounts, your expertise can make a significant difference in your clients’ retirement outcomes. Start preparing now to help your clients take full advantage of these changes. A well-informed plan today ensures a secure tomorrow.
As with any new year, 2025 will bring a fresh set of tax rules. To help you and your clients navigate the current landscape, IAMS is offering a free resource that provides all the numbers you need.
From credits, deductions, and Medicare premiums to important filing and contribution deadlines, our 2025 Tax Facts sheet is a handy reference tool outlining the tax code in an easy-to-read format.
The 2025 Tax Facts sheet includes:
- Secure Act 2.0 updates – what’s coming and what’s already in effect
- Current income tax brackets
- Standard deduction increase
- Latest retirement account contribution limits
- Social Security and Medicare taxation changes
Click below for your 2025 Tax Facts sheet.
