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Secure Your Retirement Future: Understanding the Changes Brought by the Secure 2.0 Act

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The Secure 2.0 Act was signed into law in 2022 and provides numerous changes to retirement savings plans for both participants and employers. 

What Is the Secure 2.0 Act of 2022? 

The Secure 2.0 Act is meant to improve retirement savings options in the United States and empower Americans to be retirement ready and build strong financial futures. It builds off the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, which modified employer-provided retirement plans, individual retirement accounts (IRAs), and other tax-favored savings accounts. This is also why the Act is called Secure 2.0. 

The Secure 2.0 Act (PDF) was signed into law by President Biden on December 29, 2022, as part of the Consolidated Appropriations Act of 2023. The Act has 92 provisions aimed to increase savings, boost business incentives, and provide more flexibility for those saving for retirement. Some provisions begin in 2023, but most don’t take effect until 2024 and beyond. 

3 Key Changes to Retirement and Savings Plans  

Required Minimum Distributions 

Previously, the law stated that retirees could begin taking required minimum distributions (RMDs) at the age of 72. Section 107 of Secure 2.0 increases the required distribution age from 72 to 73 beginning January 1, 2023, and to age 75 in 2033.

In addition, section 302 reduced the excise tax, which is the penalty you pay if you don’t take an RMD, from 50% to 25% as of December 31, 2022. And if you correct the failure to take an RMD within a timely manner, then the excise tax is reduced to 10%.

Catch-Up Contribution Limits 

The Secure 2.0 Act also increases catch-up contributions for retirement and savings plans, including 401(k), 403(b), and 457 plans. The 2023 catch-up contribution limit for employees 50 and older who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is $7,500.

This amount will increase to the greater of $10,000 or 50% of the regular catch-up amount starting in 2025 (PDF) (indexed for inflation) for participants ages 60 to 63. Any catch-up contributions made by participants earning over $145,000 annually must be made with after-tax dollars beginning January 1, 2024.

Retirement Funds for Emergencies 

Starting January 2, 2024, Secure 2.0 will expand access to retirement funds for personal or family emergencies, victims of natural disasters (backdated to January 26, 2021), and survivors of domestic abuse without incurring a 10% early withdrawal penalty.

For example, participants can access up to $1,000 (once a year) from their retirement savings for emergency personal or family expenses without the early withdrawal penalty. Survivors of domestic abuse can withdraw the lesser of $10,000 or 50% of their retirement savings without penalty.

This does not apply to your CalPERS pension. While you may have the ability to access some of your investments, such as a 401(k), this isn’t possible for the funds in your CalPERS pension account. There is only one instance where you can access your CalPERS pension contributions — when you leave CalPERS employment.

Your Retirement Savings Options 

We’ve mentioned only a few notable changes the Secure 2.0 Act brings to retirement savings plans. As a CalPERS member, you have a variety of options to save for retirement alongside your pension, including deferred compensation plans if you are a school or public agency member. If you are a state member, Saving Plus is available.

It’s never too late to prepare for retirement and secure your financial future, so take the time to learn about all the savings choices available to you.