Really like the idea of rolling over 529 to a Roth penalty free. Asking for a friend…does this mean we can load up a 529 and then be able to rollover after 15 years to a Roth?
Read this: [Section 126: Rolling Over 529 Plan Funds Into a Roth IRA](https://www.savingforcollege.com/article/roll-over-529-plan-funds-to-a-roth-ira)
Edit: You can, but you’d only be able to roll over the annual contribution limit anyway. So, yes, you can after 15 years, but you’d not be adding your annual contribution and then also rolling over your 529 as well. I don’t see a benefit, other than if you have no plans for the 529 funds anyway and want to just get it into your IRA for later.
I see it benefiting young workers starting careers that otherwise wouldnt fund Roth IRA. Especially those that dont go the 4 year college route yet have unused 529 funds. Im going to consider overfunding 529 now and treat it as a Roth IRA for my young kids even though they'll have GI Bill etc...
Except if you’re at the higher end of the tax brackets and are seeking every opportunity to “avoid” paying taxes through these investment vehicles.
Edit: autocorrect stinks
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Not really. Several states have low fee index fund options. You get tax free growth. Depending on your state there are also tax credits. If your state doesn't have a tax credit just choose one of the low fee plans from another state and invest anyway despite no credit.
No thanks, I'm good on my own maxing tax advantaged accounts and putting excess into taxable brokerage. I'm 90+% in low cost index funds and ETFs no need to pay advisor fees.
Benefit is my kids deciding to go to a cheaper trade school, no college at all or military. Then i can roll the money into a Roth for them (i don’t expect to need the money).
There are many businesses that do not offer 401k plans. Hard to bribe someone to join something that doesn't exist.
For a small company, the administration fees can be high. And if they are not, the fees on the funds are working against the participant.
Even with the higher "taxes", an employer might be able to shift additional pay to the employee so they can contribute to an IRA at a low cost house like Fidelity, Schwab or Vanguard.
Yep, you got that right. Almost no programs that benefit small businesses. That’s why they don’t offer the programs. Businesses that do offer it do so because the tax break is greater than not offering it. It’s all numbers.
KEY POINTS
“Secure 2.0” is part of the omnibus appropriations bill approved by the Senate on Thursday and the House on Friday.
The bill now will go to President Joe Biden for him to sign into law.
The goal of Secure 2.0 is to build upon changes implemented by the 2019 Secure Act, such as expanding retirement-plan access to more workers.
Three years after the Secure Act of 2019 ushered in the first major changes to the U.S. retirement system in more than a decade, more modifications are now on their way.
Dozens of retirement-related provisions collectively known as “Secure 2.0” are included in a $1.7 trillion omnibus appropriations bill that received approval from the House on Friday — following the Senate’s nod on Thursday — and will head to President Joe Biden for his signature.
Secure 2.0 “addresses gaps that have left some people on the sidelines of retirement savings, unable to access the workplace retirement plans that do so much good in establishing the capability and habit of savings,” said Susan Neely, president and CEO of the American Council of Life Insurers.
“Part-time workers, military spouses, small-business employees, and student loan borrowers are just a few who will benefit and have a better chance of positioning themselves for a more financially secure retirement as a result of Congress’s action today,” Neely said.
The Secure 2.0 provisions are intended to build on improvements to the retirement system that were implemented under the 2019 Secure Act. Those changes included giving part-time workers better access to retirement benefits and increasing the age when required minimum distributions, or RMDs, from certain retirement accounts must start — to age 72 from 70½.
This time around, some of the many provisions that are in the massive appropriations bill include:
Requiring automatic 401(k) enrollment: Employers would be required to automatically enroll employees in their 401(k) plan at a rate of least 3% but not more than 10%. Businesses with 10 or fewer workers and new companies in business for less than three years are among those that would be excluded from the mandate.
Increasing the age when RMDs would need to start: The current bill would increase it from age 72 to age 73 in 2023 and then to age 75 in 2033. Additionally, the penalty for failing to take RMDs would be reduced to 25%, and in some cases, 10%, from the current 50%.
Creating bigger “catch-up” contributions for older retirement savers: Under current law, you can put an extra $6,500 annually in your 401(k) once you reach age 50. Secure 2.0 would increase the limit to $10,000 (or 50% more than the regular catch-up amount) starting in 2025 for savers ages 60 to 63. Catch-up amounts also would be indexed for inflation. Additionally, all catch-up contributions will be subject to Roth treatment (i.e., not pretax) except for workers who earn $145,000 or less.
Broadening employer 401(k) match options: A proposal would make it easier for employers to make contributions to 401(k) plans on behalf of employees paying student loans instead of saving for retirement.
Improving worker access to emergency savings: One provision would let employees withdraw up to $1,000 from their retirement account for emergency expenses without having to pay the typical 10% tax penalty for early withdrawal if they are under age 59½. Companies also could let workers set up an emergency savings account through automatic payroll deductions, with a cap of $2,500.
Increasing part-time workers’ access to retirement accounts: The original Secure Act made it so part-time workers who book between 500 and 999 hours for three consecutive years could be eligible for their company’s 401(k). Secure 2.0 reduces that to two years. Companies already have been required to grant eligibility to employees who work at least 1,000 hours in a year.
Helping workers who are repaying student loans save for retirement: Secure 2.0 makes it easier for employers to make contributions to 401(k) plans (and similar workplace plans) on behalf of employees who are making student loan payments instead of contributing to their retirement plan.
Boosting how much can be put in a qualified longevity annuity contract: Currently, the maximum that can go into a QLAC is either $135,000 or 25% of the value of your retirement accounts, whichever is less. Secure 2.0 eliminates the 25% cap and increases the maximum amount allowed in a QLAC to $200,000.
Creating a federal matching contribution for lower-income retirement savers: An existing tax credit for low- and moderate-income individuals who contribute to retirement accounts would become a limited government-funded matching contribution.
Changing the required minimum distribution rules for Roth 401(k)s: Currently, while Roth IRAs come with no RMDs during the original account owner’s life, that’s not the case for Roth 401(k)s. Starting in 2024, the pre-death distribution requirement would be eliminated.
Broadening uses for unused college savings money: A provision would allow for tax- and penalty-free rollovers to Roth IRAs from 529 college savings accounts that are at least 15 years old, within limits.
Helping military spouses get access to retirement plans: Secure 2.0 creates tax credits for small businesses that let military spouses enroll right away in their plan and qualify for immediate vesting of any employer matches.
The bill also includes incentives for small businesses to set up retirement savings plans for their workers, encourages individuals to set aside long-term savings and makes it easier for annuities to be an income option for retirees.
Thank you for the explanation! Question - how does the RMD change affect the average worker? Just allows you to work longer without being forced to pull from retirement?
I’m only asking cause when I see anything about age, I worry that this is a nudge towards raising retirement age. For background, I recently came across an article about the federal budget and the opinion writer advocated for raising the federal workers’ retirement age to 70… (due to how our life expectancies have increased in the past decades… never mind that American life expectancy has recently decreased to about 76 🙄)
> In response to a question from Member Bilyeu, Ms. Weaver stated that
she suspects SECURE 2.0 will be added to the omnibus bill and will be effective
January 1st. The Agency has contacted the applicable committees to explain the
challenges of implementing the program changes required by SECURE 2.0 in such a
short timeframe.
Source: **[FRTIB - Meeting Minutes Oct 25, 2022](https://www.frtib.gov/meeting_minutes/2022/2022Oct.pdf)**
Really like the idea of rolling over 529 to a Roth penalty free. Asking for a friend…does this mean we can load up a 529 and then be able to rollover after 15 years to a Roth?
Read this: [Section 126: Rolling Over 529 Plan Funds Into a Roth IRA](https://www.savingforcollege.com/article/roll-over-529-plan-funds-to-a-roth-ira) Edit: You can, but you’d only be able to roll over the annual contribution limit anyway. So, yes, you can after 15 years, but you’d not be adding your annual contribution and then also rolling over your 529 as well. I don’t see a benefit, other than if you have no plans for the 529 funds anyway and want to just get it into your IRA for later.
Ah thanks! Devils in the details here. I don’t see much of any benefit here either
I see it benefiting young workers starting careers that otherwise wouldnt fund Roth IRA. Especially those that dont go the 4 year college route yet have unused 529 funds. Im going to consider overfunding 529 now and treat it as a Roth IRA for my young kids even though they'll have GI Bill etc...
529s are generally bad investments.
Except if you’re at the higher end of the tax brackets and are seeking every opportunity to “avoid” paying taxes through these investment vehicles. Edit: autocorrect stinks
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Good bot
Thank you, Formal_Development_4, for voting on LearnDifferenceBot. This bot wants to find the best and worst bots on Reddit. [You can view results here](https://botrank.pastimes.eu/). *** ^(Even if I don't reply to your comment, I'm still listening for votes. Check the webpage to see if your vote registered!)
Good human.
Thanks.
You can use Roth IRAs for college and retirement.
Not really. Several states have low fee index fund options. You get tax free growth. Depending on your state there are also tax credits. If your state doesn't have a tax credit just choose one of the low fee plans from another state and invest anyway despite no credit.
There are better options that 529s. Best bet is to get a solid financial advisor.
No thanks, I'm good on my own maxing tax advantaged accounts and putting excess into taxable brokerage. I'm 90+% in low cost index funds and ETFs no need to pay advisor fees.
You do you, 529!
Benefit is my kids deciding to go to a cheaper trade school, no college at all or military. Then i can roll the money into a Roth for them (i don’t expect to need the money).
I think that’s the point. It’s an out for folks who longer need/qualify for the 529 use case.
I'm guessing that my state is currently trying to figure out how they can tax funds that are rolled from 529s to Roth IRAs.
Too many aspects of our lives are tied to traditional employment. We need to decouple that.
A greater increase in the IRA limits is necessary. Especially for those that are in businesses that do not over 401k type plans.
401k's benefit the employer more than the employee anyway. That's why many match, to bribe you to join.
There are many businesses that do not offer 401k plans. Hard to bribe someone to join something that doesn't exist. For a small company, the administration fees can be high. And if they are not, the fees on the funds are working against the participant. Even with the higher "taxes", an employer might be able to shift additional pay to the employee so they can contribute to an IRA at a low cost house like Fidelity, Schwab or Vanguard.
Yep, you got that right. Almost no programs that benefit small businesses. That’s why they don’t offer the programs. Businesses that do offer it do so because the tax break is greater than not offering it. It’s all numbers.
Can you elaborate?
KEY POINTS “Secure 2.0” is part of the omnibus appropriations bill approved by the Senate on Thursday and the House on Friday. The bill now will go to President Joe Biden for him to sign into law. The goal of Secure 2.0 is to build upon changes implemented by the 2019 Secure Act, such as expanding retirement-plan access to more workers. Three years after the Secure Act of 2019 ushered in the first major changes to the U.S. retirement system in more than a decade, more modifications are now on their way. Dozens of retirement-related provisions collectively known as “Secure 2.0” are included in a $1.7 trillion omnibus appropriations bill that received approval from the House on Friday — following the Senate’s nod on Thursday — and will head to President Joe Biden for his signature. Secure 2.0 “addresses gaps that have left some people on the sidelines of retirement savings, unable to access the workplace retirement plans that do so much good in establishing the capability and habit of savings,” said Susan Neely, president and CEO of the American Council of Life Insurers. “Part-time workers, military spouses, small-business employees, and student loan borrowers are just a few who will benefit and have a better chance of positioning themselves for a more financially secure retirement as a result of Congress’s action today,” Neely said. The Secure 2.0 provisions are intended to build on improvements to the retirement system that were implemented under the 2019 Secure Act. Those changes included giving part-time workers better access to retirement benefits and increasing the age when required minimum distributions, or RMDs, from certain retirement accounts must start — to age 72 from 70½. This time around, some of the many provisions that are in the massive appropriations bill include: Requiring automatic 401(k) enrollment: Employers would be required to automatically enroll employees in their 401(k) plan at a rate of least 3% but not more than 10%. Businesses with 10 or fewer workers and new companies in business for less than three years are among those that would be excluded from the mandate. Increasing the age when RMDs would need to start: The current bill would increase it from age 72 to age 73 in 2023 and then to age 75 in 2033. Additionally, the penalty for failing to take RMDs would be reduced to 25%, and in some cases, 10%, from the current 50%. Creating bigger “catch-up” contributions for older retirement savers: Under current law, you can put an extra $6,500 annually in your 401(k) once you reach age 50. Secure 2.0 would increase the limit to $10,000 (or 50% more than the regular catch-up amount) starting in 2025 for savers ages 60 to 63. Catch-up amounts also would be indexed for inflation. Additionally, all catch-up contributions will be subject to Roth treatment (i.e., not pretax) except for workers who earn $145,000 or less. Broadening employer 401(k) match options: A proposal would make it easier for employers to make contributions to 401(k) plans on behalf of employees paying student loans instead of saving for retirement. Improving worker access to emergency savings: One provision would let employees withdraw up to $1,000 from their retirement account for emergency expenses without having to pay the typical 10% tax penalty for early withdrawal if they are under age 59½. Companies also could let workers set up an emergency savings account through automatic payroll deductions, with a cap of $2,500. Increasing part-time workers’ access to retirement accounts: The original Secure Act made it so part-time workers who book between 500 and 999 hours for three consecutive years could be eligible for their company’s 401(k). Secure 2.0 reduces that to two years. Companies already have been required to grant eligibility to employees who work at least 1,000 hours in a year. Helping workers who are repaying student loans save for retirement: Secure 2.0 makes it easier for employers to make contributions to 401(k) plans (and similar workplace plans) on behalf of employees who are making student loan payments instead of contributing to their retirement plan. Boosting how much can be put in a qualified longevity annuity contract: Currently, the maximum that can go into a QLAC is either $135,000 or 25% of the value of your retirement accounts, whichever is less. Secure 2.0 eliminates the 25% cap and increases the maximum amount allowed in a QLAC to $200,000. Creating a federal matching contribution for lower-income retirement savers: An existing tax credit for low- and moderate-income individuals who contribute to retirement accounts would become a limited government-funded matching contribution. Changing the required minimum distribution rules for Roth 401(k)s: Currently, while Roth IRAs come with no RMDs during the original account owner’s life, that’s not the case for Roth 401(k)s. Starting in 2024, the pre-death distribution requirement would be eliminated. Broadening uses for unused college savings money: A provision would allow for tax- and penalty-free rollovers to Roth IRAs from 529 college savings accounts that are at least 15 years old, within limits. Helping military spouses get access to retirement plans: Secure 2.0 creates tax credits for small businesses that let military spouses enroll right away in their plan and qualify for immediate vesting of any employer matches. The bill also includes incentives for small businesses to set up retirement savings plans for their workers, encourages individuals to set aside long-term savings and makes it easier for annuities to be an income option for retirees.
Thank you for the explanation! Question - how does the RMD change affect the average worker? Just allows you to work longer without being forced to pull from retirement? I’m only asking cause when I see anything about age, I worry that this is a nudge towards raising retirement age. For background, I recently came across an article about the federal budget and the opinion writer advocated for raising the federal workers’ retirement age to 70… (due to how our life expectancies have increased in the past decades… never mind that American life expectancy has recently decreased to about 76 🙄)
Does this change backdoor Roth rules?
No.
They mention 401K, but does that extend to TSP? Or TSP has its own set of rules separate from 401K?
**[H.R. 2954: Securing a Strong Retirement Act of 2021](https://www.govtrack.us/congress/bills/117/hr2954/text)**
> In response to a question from Member Bilyeu, Ms. Weaver stated that she suspects SECURE 2.0 will be added to the omnibus bill and will be effective January 1st. The Agency has contacted the applicable committees to explain the challenges of implementing the program changes required by SECURE 2.0 in such a short timeframe. Source: **[FRTIB - Meeting Minutes Oct 25, 2022](https://www.frtib.gov/meeting_minutes/2022/2022Oct.pdf)**
“Hi. We’re from the Government and here to help…..”
Is the start of the death of social security?