Future Returns: Family Financial Planning Under the Secure 2.0 Act

One big change Dietz notes is the increased age to take Required Minimum Distributions (RMDs) from retirement plans. It increases this year from age 72 to 73 and again to 75 in 2033.

“Many of our clients try to push off taking Required Minimum Distributions as long as possible, because they frankly don’t want to get hit with the income-tax liability until they absolutely have to,” Dietz says.

There is also a new catch-up contribution for those aged 60-63, allowing them to contribute the greater of US$10,000, or 150%, of the regular inflation-adjusted catch-up contribution to their 401(k) beginning in 2025. “It only applies for that narrow age group, but that is a huge benefit for those particular clients,” he says.

One key theme of Secure 2.0, which updates the 2019 Secure Act, is “Rothification,” Dietz notes. The expanded use of Roth IRAs in Secure 2.0 encourages more people to contribute to them instead of traditional tax-deferred accounts. This includes allowing matching vested contributions from employers to Roth accounts and requiring certain high-earning individuals to make catch-up contributions to Roth accounts instead of traditional ones.

There are also several features of Secure 2.0 focused on the workplace, including automatic 401(k) enrollment options for eligible employees and increasing the three-year, small business pension plan startup credit from 50% of administrative costs to 100 percent, up to an annual US$5,000 limit.

Penta spoke with Dietz about some of the most impactful changes under this new law that impact family financial planning.

Changed Default for Surviving Spouses

Traditionally, surviving spouses rolled their deceased spouse’s Roth IRA into their own. But starting in 2024 under Secure 2.0, they can instead be treated as the original account owner. “That may be more favorable in certain circumstances,” Dietz says, for instance, when the deceased spouse is younger than the beneficiary spouse.

“The RMDs would be based on the younger spouse’s life expectancy and would not need to come out until they reach 73 or 75, depending upon when death occurs,” he says.

Dietz adds that there is potential for “a lot of mistakes made with this particular provision” because it differs from the historical advice financial advisors and planners follow.

Also notable is that surviving spouses can name their own beneficiaries for the account, rather than relying on the decedent spouse’s.

“If you have an eligible designated beneficiary, say, a minor child, or somebody who’s chronically ill, and you name them as beneficiary, they’re going to be able to stretch that account over their lifetime instead of being stuck with the 10-year rule,” Dietz says.

A New Strategy For Leftover 529 Funds

Beneficiaries of 529 college savings accounts now have an “elegant” way to save for retirement with leftover funds, Dietz says. If there’s a balance in the account, for instance, if the beneficiary didn’t undertake post-secondary studies or received scholarships which reduced the amount spent, a leftover account balance can roll over, tax-free from a 529 account into a Roth IRA. Removing these funds previously, through non-qualified distributions, subjected them to tax penalties.

“Not only are you saving for higher educational expenses at some point in the future, but you’re also giving them a head start with retirement savings,” he says.

Up to a maximum of US$35,000 can shift tax-free, subject to annual IRA contribution level limits. This roll-over will be available for accounts that are at least fifteen years old, and contributions (plus their earnings) from within the last five years are ineligible to be moved. 

“That’s going to be a huge strategy for a lot of our ultra high net worth clients who have funds they’re looking to deploy,” Dietz says.

Improved ABLE Accounts and Special Needs Trusts

Within Special Needs Trusts, which allow assets to be left to chronically ill or disabled people without making them ineligible for benefits including Medicaid, there’s been a significant change families have been waiting for.

Effective this year under Secure 2.0, a charity can be named a remainder beneficiary for a special needs trust. Dietz says beneficiaries of these trusts often receive benefits from charitable organizations, and families often plan to leave whatever remains in the trust to that charity “to pay it forward or pay it back.”

Under the previous Secure Act, if charities were listed as remainder beneficiaries funds were paid out in shorter time frames instead of over the disabled beneficiary’s lifetime. Now the special needs trust can continue to qualify as an eligible designated beneficiary.

Also notable is a change for tax-advantaged Achieving a Better Life Experience (ABLE) savings accounts, which help beneficiaries with certain disabilities fund higher education, housing and living expenses. Previously, Dietz notes, investors were “stuck”—only able to fund ABLE accounts for individuals age 26 or younger.

“Now, as long as the disability occurs before age 46, you’re able to fund the ABLE account,” he says. “That widens the application significantly.”

This provision, which begins in 2026, might make 6 million more Americans now eligible for the accounts according to the National Disability Institute.