A major set of changes to the rules for retirement finances took effect this year, but many people may not have noticed. The rules were buried within a 4,000-page long, $1.7 trillion spending measure signed by Pres. Biden in December.
The batch of changes, called Secure Act 2.0, affords people greater flexibility in how and when they withdraw from their retirement accounts. The act also creates the first government-backed database for identifying lost retirement benefits, for instance when a person moves to a new job.
In this photo illustration the Vanguard Group logo displayed on a smartphone screen and a stock market graph in the background.Key changes in Secure 2.0 center on the relaxing of restrictions on retirement accounts, such as 401 and Roth IRA accounts.For such retirement accounts, individuals must begin pulling out money at a minimum age, even if they'd prefer to leave the accounts untouched.
For instance, if a retiree was supposed to take out $10,000 by the end of 2022 but instead took out only $5,000, then under the previous rules he or she paid a 50% penalty for the remaining $5,000. Under Secure 2.0, that penalty has been cut to 25%.In addition to easing the penalties for those who access a retirement account too late, Secure Act 2.0 softens the blow for some who take out money too early.
First off, the new rules will take the onus off of workers to initiate new retirement accounts, instead enrolling them automatically when they start a job. Also, Secure Act 2.0 allows retirement accounts to automatically travel with workers when they move from one job to the next, Dickson said.
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