Understanding the SECURE 2.0 Act: Key changes to retirement savings

The SECURE 2.0 Act is a significant piece of legislation aiming to modernize the U.S. retirement system by encouraging more Americans to save, making retirement plans more accessible, and improving retirement outcomes across income levels.

The SECURE 2.0 Act, also often referred to as the SECURE Act 2.0, is a comprehensive retirement savings law that was enacted in December 2022 as part of the “Consolidated Appropriations Act, 2023.” It builds upon the original SECURE Act of 2019 — hence the 2.0 — and includes dozens of provisions aimed at expanding access to retirement plans, increasing savings, and making it easier overall for Americans to prepare for retirement.

The SECURE Act 2.0 details over 90 changes to retirement plans and tax laws, some of which have not yet gone into effect.¹ Of these dozens of provisions, some of the main updates include increasing the required minimum distribution (RMD) age limit for certain retirement accounts, changes for catch-up contributions, and benefits for younger Americans to encourage saving for retirement.

Here are the top 10 changes you should be aware of:

1. Changes to Required Minimum Distributions

The legislation brought about many changes to RMD requirements. The most significant changes in SECURE 2.0 for RMDs include:

• The age at which retirees must start taking RMDs from retirement accounts increased from 72 to 73, which went into effect in 2023. However, if you turned 72 in 2022 or earlier, your RMDs will still need to be withdrawn as scheduled. It is important to note that SECURE 2.0 will increase the age requirement for RMDs to 75, which will go into effect starting 2033.
• As of 2024, Roth accounts in employer-sponsored plans — like Roth 401(k)s or Roth 403(b)s — will no longer be subject to RMDs during the account holder’s lifetime. RMDs previously applied to Roth 401(k)s but not Roth IRAs, so this change aligns the rules for both.
• As of 2023, the excise tax penalty for failing to take an RMD dropped from 50% to 25%. If the mistake is corrected in a timely manner, the penalty may be further reduced to 10%.
• As of 2024, surviving spouses can now be treated as the deceased spouse for RMD purposes, allowing them to delay RMDs and potentially use more favorable life expectancy tables, which can reduce the size of distributions.

It is also important to be aware of which retirement accounts are subject to RMD rules, as this does not apply to all of them, therefore, you might want to check with a financial professional for more specific guidance. You may also want to look into RMD strategies to see how these changes can be used to your advantage.

2. Increase in catch-up contributions

Starting in 2025, individuals aged 60 – 63 can make higher catch-up contributions to eligible retirement plans up to the greater of (1) $10,000 or (2) 50% more than the usual catch-up amount for those age 50 and above. SECURE 2.0 catch-up contribution amounts will be indexed for inflation starting in 2026.

The $1,000 IRA catch-up contribution limit for those over 50 will also be indexed to inflation in the future; however, it will remain at $1,000 in 2025. It is also important to note that starting in 2026, catch-up contribution restrictions will have to be made as Roth conversions for high earners, but this topic will be covered in more detail below.

3. Roth options expanded

As of 2023, SIMPLE IRAs and SEP plans were added to the types of plans that are permitted to accept Roth contributions. Expanding the types of plans to offer Roth employer matching contributions gives participants more flexibility in tax planning.

4. Automatic enrollment in 401(k) plans

Starting in 2025, employers who offer 401(k) and 403(b) plans are required to automatically enroll participants in the respective plans as soon as they become eligible; however, employees may still opt out of coverage. The initial automatic enrollment comes with a minimum contribution rate of 3%, increasing annually by 1% until it reaches at least 10% but no more than 15%.

The legislation also permits retirement plan service providers to accommodate employer-sponsored retirement plans with automatic portability services. This would automatically transfer an employee's retirement account to their new job, even if the account had a low balance, encouraging them to continue saving in another eligible retirement plan rather than cashing out their balance.

5. Benefits for part-time workers

The SECURE Act 2.0 also incentivizes part-time workers to save for retirement. As of 2025, long-term part-time employees are eligible to participate in their employers’ 401(k) plans after two years instead of three. According to this law, employees need to complete one year of work with the 1,000-hour rule or two years with at least 500 hours to be eligible. Pre-2021 service, however, does not count towards this requirement.

6. Student loan matching

As of 2024, employers can make matching contributions to retirement accounts based on their employees’ student loan payments. This can help those who can’t afford to save while paying off their debt and can incentivize them to continue saving for retirement.

7. Emergency withdrawals and savings accounts

As of 2024, you can take a distribution of up to $1,000 from a tax-preferred retirement account for emergency exceptions, being unforeseeable or immediate financial needs related to personal or family emergencies. This emergency withdrawal is permitted without owing the additional 10% tax that generally applies to early distributions.

However, only one distribution is allowed per year, and you would have the option to repay the distribution within three years. Until repayment occurs, no further emergency distribution would be permitted during the three-year repayment period.

Aside from emergency withdrawals, the SECURE Act also made changes allowing employers to offer non-highly compensated employees pension-linked emergency savings accounts. Employees can contribute no more than 3% of their salary, and contributions are capped at $2,500 or lower if set by the employer. Contributions are made on a Roth-like basis, and the first four withdrawals in a year would be tax and penalty-free.

These changes would incentivize people to save on their own for emergencies rather than automatically tap into their retirement savings. Having an emergency fund is crucial if you want to meet unexpected costs without derailing your financial situation or depleting your retirement funds.

Raisin can help you make the most of your savings if you are trying to start an emergency fund. Options like high-yield savings accounts or certificates of deposit can help maximize your savings potential and get the most of your hard-earned money.

8. 529 to Roth IRA transfers

As of 2024, parents saving for their children’s college funds with a 529 account are now able to roll those funds over to a Roth IRA for the beneficiary, but only under certain conditions with limitations. After 15 years, funds from the 529 plan can be rolled over into a Roth IRA, but the amount rolled over cannot exceed the annual IRA contribution limits and is also subject to a lifetime limit of $35,000.

SECURE 2.0 also has some notable retirement plan changes, such as Roth catch-up contributions for high earners and saver’s credit, which are not yet in effect. Some of the provisions listed above, such as the increased RMD age, also include scheduled updates in the future.

Here are two notable changes to look out for in 2026 and 2027:

9. Roth catch-up contributions for high-earners

Beginning in 2026,² catch-up contributions made by high-earning participants in a 401(k) or similar retirement plans must be designated as Roth (after-tax) contributions. This would apply for participants in a 401(k), 403(b), or governmental 457(b) plan who earn over $145,000.

10. Saver’s credit

Starting in 2027, the saver’s credit — a tax credit to help middle- to low-income earners contributing to their retirement plan — will be replaced with direct government matching contributions to the participant’s IRA or eligible retirement plan.

The match will be 50% of contributions up to $2,000 per individual. This match phases out between $41,000 and $71,000 for taxpayers filing a joint return, or between $20,500 and $35,500 for single taxpayers and those married filing separately.

SECURE 2.0 Act delivers a lot of change, aiming to help Americans be well-prepared for retirement. It is a very expansive, comprehensive bill that entails much more than what was listed above. If you would like a more detailed analysis, you might want to contact a retirement financial advisor to understand how these changes may affect your personal situation.

Saving for retirement is crucial to ensuring a stable financial future that allows you to enjoy your golden years. If you are looking to boost your retirement savings, Raisin is here to help. The Raisin marketplace gives you access to high-yield savings products with competitive interest rates to boost your savings potential. Sign up today and start maximizing your savings potential!

1. https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf
2. https://www.irs.gov/newsroom/irs-announces-administrative-transition-period-for-new-roth-catch-up-requirement-catch-up-contributions-still-permitted-after-2023