In today’s ever-evolving financial landscape, retirement planning has taken center stage as both businesses and individuals recognize the importance of securing their financial future. Recently, Robert Ryerson, President of New Century Planning Associates, sat down with Charles Rosenberg, Director of Sales and Marketing at INTAC FuturePlan, to discuss the critical updates in retirement planning brought by the SECURE Act 1.0 and 2.0.
Retirement Planning Gets a Boost
The SECURE Act 1.0, passed in 2019, marked a pivotal moment for retirement plans, particularly for small and mid-sized businesses. Rosenberg and Ryerson highlighted that the government’s intention was clear: to address the alarming shortfall in retirement savings. For small businesses, the act significantly increased the tax credits for setting up retirement plans, from $500 to $5,000 annually. It also incentivized automatic enrollment, with an additional $500 credit, making it easier for employees to start saving.
SECURE Act 2.0: More Savings and Roth Opportunities
Building on the momentum of SECURE Act 1.0, the SECURE Act 2.0, enacted in late 2022, introduced even more provisions aimed at enhancing retirement savings. A key highlight is the increased contribution limits for individuals aged 50 and older, allowing them to contribute upwards of $30,000 to their 401(k) plans—a significant rise from previous years.
Perhaps the most groundbreaking change, however, was allowing employer contributions to be made as Roth contributions. Historically, only employee contributions could be designated as Roth, but now employers can make Roth contributions on behalf of their employees. This allows for more tax-free growth opportunities, positioning retirement savers for greater financial flexibility in the future.
Required Minimum Distributions (RMDs) Extended
Another important change in SECURE Act 2.0 is the gradual extension of the required minimum distribution (RMD) age. The RMD age has been pushed from 72 to 73, and eventually to 75, allowing individuals more time to let their savings grow before being required to withdraw. While Rosenberg expressed surprise, given the country’s financial state, he noted the flexibility this provides retirees.
The Importance of Roth Conversions
Rosenberg and Ryerson also touched on the importance of Roth IRAs and Roth conversions in retirement planning. Rosenberg emphasized that adding a Roth component to a retirement plan is a simple amendment and something all businesses should consider. The long-term tax benefits of Roth conversions, especially in a climate of potential future tax increases, make it a valuable strategy for those looking to maximize their savings.
Consulting with the Experts
For those looking to navigate the complexities of retirement planning, working with knowledgeable consultants is essential. Rosenberg shared a story of a business owner with a significant retirement account who had not filed the proper paperwork or conducted the necessary testing—resulting in potential tax liabilities. Enlisting the help of a professional firm can provide the proactive consulting needed to avoid costly mistakes and maximize retirement savings.
Final Thoughts
As the landscape of retirement planning continues to shift, the SECURE Act 1.0 and 2.0 offer significant opportunities for businesses and individuals alike to build and grow their savings. With increased contribution limits, expanded Roth options, and extended RMD ages, now is the time to take advantage of these changes. For those seeking expert guidance, New Century Planning Associates, INTAC FuturePlan, and other qualified consulting firms offer invaluable support in navigating these opportunities and ensuring a secure financial future.
To learn more, visit www.newcenturyplanning.com and www.intacinc.com.