What Is SECURE 2.0 and Why Does It Matter for Your Financial Plan?
When the original SECURE Act rolled out in 2019, most people didn’t notice until it changed the age for Required Minimum Distributions (RMDs). But SECURE 2.0? It’s a much bigger deal—especially in 2025, when some of the most impactful changes really start to take effect.
Whether you're a business owner setting up retirement plans, a high-income professional, a retiree navigating RMDs, or a parent with a leftover 529 plan, this legislation touches a surprising number of financial planning areas.
And here's the thing—some of these changes sound helpful (and many are), but they also come with a few landmines if you're not paying attention. The sooner you plan, the better positioned you'll be to use these updates to your advantage.
Section 1: Changes Affecting Individuals
How Does SECURE Act 2.0 Impact Individual Retirement Savers?
Starting in 2025, if you’re between ages 60 and 63, you’ll be able to contribute an extra $10,000 (or 150% more than the standard catch-up contribution) to your 401(k) or similar workplace plan. That’s great if you’re in your peak earning years and trying to fast-track your retirement savings.
ROTH Catch-Up Rule for High Earners
If you earn more than $145,000, your catch-up contributions will have to go into a ROTH account. This means no up-front tax deduction, but the money grows tax-free. It's a big shift for folks who’ve always leaned into pre-tax savings.
(Quick side note: If your plan doesn't allow ROTH contributions, you're not allowed to make any catch-up contributions until it's updated. Yep—that’s the rule.)
IRA Catch-Up Contributions Indexed to Inflation
Previously, the catch-up amount for IRAs was stuck at $1,000. Starting in 2024 (with inflation adjustments continuing into 2025 and beyond), that number will go up automatically each year based on inflation. It won’t move the needle dramatically, but every bit helps.
529-to-ROTH IRA Rollovers
This one’s generating a lot of buzz: unused money in a 529 college savings plan can now be rolled over into a ROTH IRA for the beneficiary—up to $35,000 over their lifetime, assuming the account’s been open at least 15 years.
I’ve already had clients asking: “So if my kid doesn’t use their 529, I can turn it into retirement savings?” Yes… with caveats. It’s a cool feature, but you’ll want to be careful about timing and contribution limits.
RMD Age Changes and Inherited IRA Rules
The RMD age has increased to 73 now and is slated to go up again to 75 for those born in 1960 or later. Meanwhile, the 10-Year Rule for inherited IRAs (non-spouse beneficiaries must withdraw all funds within 10 years) is still in effect—and a little murky.
So if you’re planning to leave IRAs to adult children or younger heirs, this matters. Big time.
Lower Penalties for Missed RMDs
Historically, if you missed an RMD, the IRS could penalize you a whopping 50% (one of the highest penalties in the tax code) of what you didn’t withdraw. SECURE Act 2.0 lowers that penalty to 25%—and even down to 10% if corrected promptly.
Not that you want to miss an RMD—but at least the consequences are a little less terrifying now.
My Take: This is the time to be thinking strategically about ROTH conversions, catch-up opportunities, and 529 rollovers. If you’re retiring soon—or inherited an IRA recently—early planning could save you thousands in taxes and headaches later.
Section 2: What Should Employers Know About SECURE Act 2.0?
Automatic Enrollment in Retirement Plans
Starting in 2025, new 401(k) and 403(b) plans will be required to automatically enroll employees at a rate of at least 3%, with automatic escalation up to 10%. Employees can opt out, but the default will be “yes, you're contributing.”
For business owners, this means more administrative work—but also potentially better participation rates, which can help plans pass annual testing.
ROTH Employer Matching Contributions
Employers can now offer ROTH matches—a nice feature if you’re building tax-free retirement income. But those ROTH match dollars are taxable to the employee in the year they’re contributed.
This could catch people off guard, especially if they assume their match is just “free money” with no strings attached.
Expanded Tax Credits for Small Businesses
Small businesses that start new retirement plans can now claim up to 100% of administrative costs (maximum of $5,000), plus an additional credit for employer contributions for eligible employees.
That’s real money—and a strong nudge for smaller companies to set up plans that previously felt too expensive.
Long-Term, Part-Time Employee Eligibility
SECURE Act 2.0 shortens the time frame: Starting in 2025, part-time employees working at least 500 hours/year for two consecutive years must be allowed to participate in 401(k) plans. (Previously, it was three years.)
Employers will need to track eligibility closely and update plan documents to stay compliant.
My Take: If you sponsor a retirement plan, it’s time for a review—like, yesterday. Between ROTH matching, part-time eligibility, and auto-enrollment, your documents, systems, and communication plans will need attention. The good news? There are some real cost-saving incentives, especially for smaller businesses.
Section 3: What Should You Do Right Now?
If your head’s spinning a little, I get it. This is a lot of change packed into one law—and while some of it is genuinely helpful, the planning window is tight.
So, here’s where to start:
- Talk to your financial planner to review how these updates impact your situation.
- Consider ROTH conversions if you're in a lower tax bracket this year.
- Business owners: Review retirement plan documents and check eligibility for tax credits.
- Review 529 plans if college is finished and explore ROTH IRA rollover options.
- Review your RMD strategy, especially if you're nearing age 73 or managing inherited IRAs.
Use SECURE Act 2.0 to Your Advantage
These aren’t minor footnotes. The changes in SECURE Act 2.0 affect how you save, withdraw, and leave behind retirement money. The good news is, with a little foresight, you can turn these changes into opportunities.
If you need help navigating it all, let's set up a20-minute review.
The goal: make 2025 work for you, not surprise you.
Schedule a consultation with FSC Wealth Advisors today to discuss your current situation.
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