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Surprise! New Law That Helps Your Wealth-Building (Secure 2.0 Act)



If you’re like most of us, you are pretty cynical about the government and if it ever does anything to benefit the average person. Usually so many of the wealthy individuals and big profitable companies seem to get all the benefits when the government finally enacts new laws. We are usually just sitting on the sidelines and watching all of the goodies pass us by.


Well listen up! I have good news to share with you this time about a new law and changes that were passed and signed into law just before Congress closed for the Christmas holiday 2022. The legislation is called the SECURE 2.0 Act of 2022. This is a gamechanger that will help you in so many ways to get you on track to a more secure financial future. There are a lot of changes that this legislation will do to provide help for you. I will touch on a few that I am sure will be a big benefit to you, however you must act in order to take advantage of what is available.


The five things from the SECURE 2.0 Act that I will highlight are the following: 1) Roth 401K Matching, 2) Emergency Savings as part of your 401K (may be eligible for employer matching contributions, 3) Student Loan payments included in retirement savings accounts (eligible for employer matching contributions), 4) Part-time employee participation in 401K plans eligibility reduced from three years to two years, and 5) Employers may offer small incentives like gift cards to encourage your participation in retirement savings programs. I don’t know about you, but this is pretty exciting news about new changes to help grow your wealth. Let’s check these out in more detail.


Roth 401K Match

Before the SECURE 2.0 Act, employer matching contributions in retirement savings plans were only eligible in pre-tax accounts like a regular 401K plan. Now, employer matching contributions can also be made on Roth 401K accounts. Therefore if you choose to make contributions to a Roth retirement plan to take advantage of future earning growing tax free for life, you can also elect to have employer matching contributions as part of this savings.

One other welcomed surprised, starting next year in 2024, Roth 401K plans will no longer be required to make Required Minimum Distributions (RMD). That means you can manage this account as you wish with no withdrawal requirements.


Emergency Savings

You know how important it is to have emergency savings. Wouldn’t it be nice to have some help to reach your emergency savings? With the SECURE 2.0 Act, help is on the way. Starting in 2024, employer retirement savings plans would be able to add an emergency savings account that is an employee designated Roth account. Contributions would be limited to $2,500 per year. You would be able to make 4 withdrawals from the account during the year tax and penalty free. This emergency saving may also receive employer matching contributions. Nice!


Student Loan Debt

I know this topic is a sore spot for many. With the SECURE 2.0 Act, it may now be music to your ears. Starting in 2024, your student loan payments may receive employer matching contributions to your retirement account. This way although you are making student loan payments, the employer matching contribution means you would be saving toward your retirement at the same time. This is a double bonus. Reducing your student debt while keeping your savings on track. Fantastic!

Part-time Employee Participation in Retirement Savings Plans

Before SECURE 2.0 Act, part-time employees’ eligibility to participate in employer-sponsored 401K plans took three years. Now, this has been reduced to two years. This applies to all part-time workers, but it is noted that women who sometimes work part-time during motherhood years would no longer have to wait three years before retirement plan eligibility. About time!


Retirement Savings Encouragement

The government wants you to have a secure financial future. Part of that security comes from taking advantage of employer sponsored retirement savings plans. To encourage participation, SECURE 2.0 Act allows employers to offer small immediate financial gifts (like gift cards) in addition to matching contributions to encourage your participation in these savings plans. I always say, “Don’t Leave Free Money on the Table.” If you are getting paid to save for your future, I encourage you to take advantage. Get Started!


Final Note

There are many more goodies in the SECURE 2.0 Act than the five things listed above. Things like promotion of Saver’s Credit to encourage savings for lower income earners, increasing the Required Minimum Distribution (RMD) age to 73 in 2023 and to 75 in 2033, increasing IRA and 401K plans catch-up contributions, and many more. Now you can truly say that the SECURE 2.0 Act is one time that a law from the government has had your back.


I know with so many changes taking place, it can be overwhelming. You may be wondering where do I start? No worries. Paycheck to Wealth is here to help. If you have any questions or would like to discuss these changes further, reach out to Paycheck to Wealth and let’s get started on building your more secure financial future.

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