The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0, signed into law in late 2022, is gradually changing the retirement landscape. With changes about to take effect in 2025, retirees and those close to retirement need to be aware of how these updates might have a massive impact on their financial plans. Let’s break down a few key provisions.
For those in their early 60s, there’s good news on the horizon. Starting in 2025, those aged 60 through to 63 years old and are taking part in employer-sponsored retirement plans, such as 401(k)s, will have the opportunity to contribute significantly more. This new rule allows these individuals to make catch-up contributions up to $10,000 or 150% of the standard catch-up limit for those 50 and older—whichever is greater. While 2024 allows for a combined contribution of $30,500 for people working who are over 50, this provision creates an additional window of opportunity for those in this specific age group.
A massive decision for retirees involves choosing between traditional and Roth 401(k) plans. Contributions to traditional 401(k)s offer tax-deferred growth, but withdrawals are taxed as income. Meanwhile, Roth 401(k) contributions are made with after-tax dollars, and withdrawals are entirely tax-free if the account has been held for at least five years and the account holder is over 59 years old. This distinction becomes even more relevant with recent changes: starting in 2024, Roth 401(k) plans no longer require minimum distributions when participants reach 73. For high-income earners, however, a shift is coming. Beginning in 2026, individuals aged 50 and older who made $145,000 or more in the previous year will be asked to make catch-up contributions to a Roth 401(k).
Another huge change involves automatic enrolment. Studies have shown that automatic enrolment boosts participation rates in employer-sponsored retirement plans. Starting in 2025, new 401(k) or 403(b) plans must automatically enroll employees at a contribution rate between 3% and 10% of their salary, with annual increases of 1% until the rate reaches between 10% and 15%. Employees retain the option to opt-out, but this change could encourage more workers to build substantial retirement savings over time. Exemptions apply to smaller businesses and newer startups, but for most companies, this requirement represents a shift toward promoting financial readiness.
For anyone who has misplaced a 401(k) from a previous employer, the SECURE 2.0 Act offers a lifeline. Beginning in 2025, employers will be mandated to report information about abandoned plans to the Department of Labor. This pool of data will feed into an alleged new search tool designed to help individuals locate lost 401(k) accounts. However, until this tool becomes widely available, retirees can take proactive steps to hunt for their missing plans. A good starting point is to look for old account statements, which often contain crucial details like account numbers and administrator contact information. It’s also worth double-checking whether the plan was moved to your state’s unclaimed property fund, as many states offer searchable online databases. Alternatively, resources like the National Registry of Unclaimed Retirement Benefits or missingmoney.com might yield results.
The SECURE Act 2.0’s updates reflect a much larger effort to transform retirement security and ensure individuals can maximize their savings. By keeping your ears to the ground about these provisions, retirees and those approaching retirement can put themselves in better positions to navigate the ever-evolving financial landscape. For anyone unsure about how these changes might impact their specific situation, seeking professional guidance can provide clarity and confidence moving forward.
