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Secure 2.0 Act Lets You Boost Your Retirement Savings

The Securing a Strong Retirement Act, also known as the Secure 2.0 Act, was finalized in 2022 across two pieces of legislation from the House of Representatives (H.R. 2954) and U.S. Senate (S.1770). Several of the bill’s provisions come into effect both this year, next year, and beyond, which means understanding its advantages is important for retirement investors. 

The primary goals of the Secure 2.0 Act are to encourage people to save more for retirement, improve retirement rules, and reduce the cost to employers of setting up retirement plans. Read on to understand the changes and improvements below, and how they can boost your retirement savings.  

Changes to Required Minimum Distribution (RMD) Lengthen Savings Time 

The Secure 2.0 Act aims to significantly improve retirement savings choices, and expands upon the original “1.0” version from 2019. The legislation contains a variety of changes and provisions related to retirement accounts, including several of interest to cryptocurrency investors and holders of digital assets within these accounts. Below are the changes at a glance: 

  • RMD age increased from 72 (2022) to 73 (2023) 
  • Age will increase again to 75 in 2033 
  • The penalty for not taking an RMD decreased from 50% to 25%  

Firstly, the bill increases the RMD age from the prior 72 years to 73 years old for 2023. In 2033, the RMD age will further increase to 75. This brings added flexibility and gives investors more time to save, though it’s important to note that those already underway with their RMDs from age 72 in 2022 will need to continue their original distribution schedule. 

Penalties have also been reduced for failing to take an RMD, now comprising 25% of the RMD value instead of 50%. Additionally, if failure to take an RMD is resolved expeditiously, the 25% penalty may decrease further to only 10%.  

Exciting Increases in Retirement Contribution Limits 

Beyond RMD changes, the Secure 2.0 Act also boosts retirement contribution limits, meaning individuals can save more for retirement faster, should they choose. This is potentially and especially powerful to cryptocurrency retirement investors, considering the performance track record of the asset class.  

For 2023, the IRA contribution limit has increased to $6,500 for individuals under age 50, and $7,500 for individuals over age 50. For 401(k) plans, the contribution limit will increase to $22,500, up from $20,500. Also beginning in 2023, contributions to SEP and SIMPLE IRAs are now Roth eligible.  

Beginning in 2024, the IRA catch-up contribution limit will change from $1,000 for individuals over age 50 to a limit indexed to inflation each year based on cost-of-living adjustments (COLA). Considering the inflationary behavior of the U.S. dollar in recent years (crypto enthusiasts tend to know this well), this is a welcome change. 

Finally, beginning in 2025, the 401(k) catch-up contribution limit will increase for individuals between the ages of 60 and 63 to at least $10,000, and will also adjust for inflation starting in 2026. Similar to how Social Security has its own COLA that determine its increase each year, catch-up contributions described above now operate similarly, helping perpetuate the idea that it’s never too late to save for retirement. Combined with the potential of cryptocurrency in your retirement account, the increases may be powerful incentives for retirement savings late-starters. 

Amendments to Qualified Charitable Distributions 

Another provision of the Secure 2.0 Act concerns qualified charitable distributions. Starting in 2023, individuals over the age of 70 ½ may elect a one-time gift of up to $50,000 to either a charitable remainder unitrust, charitable remainder annuity trust, or charitable gift annuity. In 2024, like with the aforementioned catch-up contribution limits, the qualified charitable distribution limit will be indexed for inflation. 

New Rollover Choices and Emergency Flexibility 

The Secure 2.0 Act legislation also contains provisions granting 529 plan assets eligibility to be rolled into a Roth IRA for the beneficiary after 15 years (additional eligibility and contribution limits apply). This grants new flexibility in moving assets and funds between after-tax retirement vehicles, including mutual funds, ETFs, and other similar investments where investment value grows on a tax-deferred basis (see our handy guide for more on reporting retirement taxes). 

Lastly, several sections of the bill expand access to retirement funds ahead of retirement age under certain circumstances. For example, section 115 allows participants to access up to $1,000 (once yearly) for emergencies, including family costs or personal reasons, without paying 10% early withdrawal penalties. Elsewhere, section 127 permits employees to open a Roth emergency savings account containing up to $2,500 per participant, beginning in 2024. Domestic abuse survivors are now allowed to withdraw significant amounts of funds from retirement accounts early without penalty, as are victims of federally declared natural disasters. 

Overall Implications of the Secure 2.0 Act 

In total, the Secure 2.0 Act loosens and expands contribution limits and reduces friction and pain points from the retirement experience over time. It also attaches the yearly increase of certain limits to an inflation-adjusted growth schedule (a benefit well understood by cryptocurrency enthusiasts), and creates provisions for victims of violence, emergencies, and disasters. 

For cryptocurrency retirement investors, these improvements largely mean more dollars individuals can contribute toward one of the top-performing asset classes, with few rivals in the past decade. In crypto, and especially during and shortly after crypto winter, every dollar counts toward the opportunity to realize a dream retirement on, or even significantly ahead, of schedule.