How Does Secure Act 2.0 Change Saving for Retirement?

The year-end fiscal 2023 government funding bill contained legislation that makes the most significant changes to the U.S. retirement savings system in decades. The SECURE 2.0 Act builds on retirement savings changes passed in 2019 and contains new provisions that further raise the required minimum distribution (RMD) age, shift to automatic plan enrollment and provide for new matching/emergency withdrawal opportunities.

Most of the key provisions are effective in the 2024-2025 timeframe, but smaller adjustments (such as increasing to 73 the age for starting RMDs) are effective in 2023.

The SECURE 2.0 Act is the second bipartisan bill designed to boost access to retirement savings.

The SECURE 2.0 Act is a follow-up bill to the original SECURE Act passed in 2019, which began the process of increasing the RMD age from 70 1/2 and increasing participation in retirement savings plans through various tax incentives. The Act also eased administrative rules for employer-sponsored retirement plans.

The new legislation goes well beyond the original iteration and seeks to expand participation in retirement savings plans through mandatory enrollments, as well as increased flexibility in the individual use of advantaged savings accounts. The Act also extends the savings timeframe before RMDs are required to age 75 by 2033 – an almost five-year increase from the original RMD distribution age.

Overall, the changes enacted by the legislation (to be phased in over a multiyear period) are likely to boost the asset base for asset managers through increased participation and interest in retirement savings plans.