SECURE 2.0 provides new opportunities for advisors

Clients of all ages can benefit from the provisions of this bill, but they need you to help them take advantage of these features.

By Alex Kim

The year 2022 wrapped up with some significant retirement reforms known as SECURE 2.0. This legislation is a win for holistic financial security professionals across the board — leaders, advisors, brokerage firms and everyone in between. Many of the 90+ provisions encourage Americans and businesses to start saving earlier, saving more and saving more often — so that Americans can accumulate more retirement wealth and advance financial security. Here are just some of the most impactful provisions in SECURE 2.0:

» Increased the age to take required minimum distributions to age 73 effective now, and to age 75 in 2033, allowing more Americans to save more and build their retirement nest eggs.

» Increased catch-up contributions in employer retirement accounts from $7,000 to $10,000 to give more Americans, especially those nearing retirement, an opportunity to save more. Note that contributions must be made in the form of after-tax Roth contributions for those above a certain earnings threshold and becomes effective in 2025.

» Starting next year, beneficiaries of 529 plans have the flexibility to roll over unused balances, up to $35,000, into a Roth IRA and help kick-start retirement savings.

» Employees with student loans — whether these employees are professionals who accumulated excessive loans or recent graduates just starting a job — do not have to choose between paying off the student loan or contributing to a retirement account. Starting in 2024, they can do both. Employee repayment of student loans will be eligible for an employer matching contribution to a retirement plan.

» Starting in 2025, it will be easier for long-term, part-time employees to participate in employer retirement plans by reducing the continuous time of employment from three years to two. This will allow employers to better retain their employees and permit more part-time employees to save for retirement.

» Penalty-free distribution from retirement plans to pay premiums on qualified long-term care insurance will provide flexibility for individuals contemplating holistic financial planning, effective 2026.

» SIMPLE, SEP and 403(b) plans progress more toward 401(k) retirement plans with increased contribution limits and availability of multiple employer plans.

» Auto-enrollment and auto-escalation starts in 2025 and will increase the number of workers saving for retirement.

With SECURE 2.0 now the law of the land, there are opportunities for financial security professionals to educate their clients and create new business strategies. The obvious opportunities lie with clients impacted in the following ways:

» Those near retirement where catch-up contributions, RMDs and long-term care coverage might be needed.

» A young couple with a newborn or young child could benefit from a discussion on 529 plans and potential 529 rollovers into a Roth IRA. If the couple has student loans, the new employer matching contributions might be a windfall as the couple starts saving for retirement.

» Businesses can retain valuable employees in today’s economy and workforce environment by providing valuable retirement savings vehicles, even for eligible part-time workers.

As Finseca sees it, the passage of SECURE 2.0 was no small feat. Our members and government affairs staff worked with congressional decision-makers and tax law writers. Our alignment and strong partnership with sister trade organizations helped get SECURE 2.0 included in the final bill. The result further proves that speaking with one unified voice throughout the entire process produces tremendous results.

Again, SECURE 2.0 is a win for holistic financial security professionals across the board — leaders, advisors, brokerage firms and everyone in between. We hope you’ll share that success with your clients today!

Alex Kim is vice president, public policy, with Finseca. He may be contacted at alex.kim@ innfeedback.com.