SECURE 2.0: Top 5 Items to Discuss with Your Clients

The new SECURE Act 2.0 (Setting Every Community Up for Retirement Enhancement Act) seeks to make it easier for U.S. taxpayers to save for retirement and expands access to retirement plans. That’s a good thing.

But as with virtually everything written by politicians and lawyers, figuring out which parts of the new bill are relevant for you or your clients can be a daunting task. However, just because something looks complicated does not mean it’s not worth diving in deeper to examine which changes could benefit you, your clients, and your business. That’s what we are going to do in this blog.

It’s true that many of the changes in SECURE 2.0 are more specific to the mechanics and logistical side of how retirement plans work, and a few items are more specific to a subset of the population and therefore have limited impact or benefit to many investors. What we have sought to do here is focus on the “Top 5” changes in the act that we see being most relevant to financial advisors and their clients. We have summarized what each of these five changes are and why you may want to discuss these particular points with your clients.

Here are the highlights of SECURE 2.0:

1. Delayed Required Minimum Distributions (RMDs)

SECURE 2.0 has increased the age at which individuals must begin taking RMDs from a retirement plan or individual retirement account. This change will allow investors to continue earning tax-deferred returns within their retirement vehicle for a longer time. This is particularly beneficial for investors you may be working with who don’t need the additional cashflow when they hit age 72. They will no longer need to take unnecessary distributions earlier than desired and forgo the potential for continued tax-deferred growth.

Prior to January 1, 2020, an individual was required to begin receiving RMDs by age
70 ½. From 2020 until the start of this year, the RMD age was 72. For 2023, the minimum age requirement to begin RMDs has increased to 73. And in 2033, RMD age requirements will increase again to 75.

This is an important topic to include in your conversations with clients entering their 70s.