Got leftover 529 education savings funds? You may be able to jumpstart your beneficiary's retirement savings. While college costs keep rising, “some students receive scholarships or grants that could leave unspent money in a 529 Education Savings Account started for them," Greenberg notes. As of 2024, that money may be rolled directly into a Roth IRA for the beneficiary of the 529 account without Federal income tax or the usual 10% penalty for non-education withdrawals. Among the restrictions, the 529 must have been open for 15 years and the money to be rolled over must not have been contributed within five years of the rollover.
Nearing (or in) retirement?
Larger “catch-up” contributions can help you make up for lost time. Starting in 2025, “catch-up” provisions for savers aged 50 and over will offer an additional boost for those aged 60 through 63: they’ll be able to contribute $10,000 or 150% of the standard catch-up amount (whichever is greater) to 401(k) and 403 (b) plans. For SIMPLE IRAs and SIMPLE 401(k) plans, the limits are $5,000 or 150% of the annual catch-up contribution limit. “After 2025, these increased catch-up amounts will be indexed annually for inflation,” Greenberg says. One caveat: Employees earning more than $145,000 will have to make any contributions to a Roth plan, using post-tax rather than pre-tax dollars. Check to make sure that your plan permits catch-up contributions.
You can keep retirement assets tax-deferred for longer. Anyone turning 72 after January 1, 2023 can wait until age 73 before taking required minimum distributions (RMDs) from their retirement plans and IRAs. That’s up from the prior year’s RMD age of 72 and 70½ in 2019. By 2033, the age will rise to 75. “The extra time allows you the opportunity to keep more of your savings invested,” notes Greenberg. Another plus: The bill reduces additional taxes for failing to take RMDs on time (to 25% of the amount of the missed distributions, down from 50%) and fixes an RMD anomaly for Roth investors. “While Roth IRAs typically don’t require RMDs, Roth 401(k) and 403(b) plans do. That requirement ends starting in 2024,” Greenberg notes.
Consider giving more to charity. Even as the RMD age increases, individuals can still make qualified charitable distributions (QCD) of up to $100,000 per year, starting at age 70 ½. To further encourage giving, the bill calls for adjusting that amount annually for inflation, with the first adjustment coming in 2024. SECURE 2.0 also expands existing QCD rules by enabling individuals to make one-time distributions of up to $50,000 from their IRAs to split-interest trusts such as Charitable Remainder Trusts and Charitable Gift Annuities, starting in 2023.
Own a small business without a retirement plan?
Here’s incentive to start one. “Starting in 2023, companies with 50 or fewer employees can earn a tax credit worth 100% of administration costs, or up to $5,000 per year,” Greenberg says. “That could mean up to $15,000 in potential savings — a big number for a small employer.” Previously, those businesses were eligible for the same 50% credit available to companies with up to 100 employees.
These are just a few of the many SECURE 2.0 changes affecting retirement savings, Greenberg stresses. For more details, read “Understanding the SECURE Act of 2022” and “Tax Alert 2023-01: SECURE 2.0 Provisions Affecting Retirement Plans and IRAs.” Then try Merrill’s retirement calculator to find out whether you’re saving enough for retirement — and be sure to consult with your tax professional and financial advisor before making any decisions.