A few weeks ago, the Secure 2.0 Act came out with a dizzying number of changes (90 to be exact). With social security set to run out in 2037, it’s not surprising that this legislation inches toward getting Americans to save more for their own retirements. The bill itself is 4,100 pages, so we’ve tried to condense the most important topics for practice owners here:

Starting in 2024 there will be a second set of “catch up” contribution ages in addition to the current catch up starting at age 50. Those ages 60, 61, 62 or 63 will be able to contribute an additional $10,000 per year for 401ks and $5,000 for Simples.

Starting in 2024, all catch up contributions are subject to Roth rules rather than what a plan allows for. We will keep you posted on the format of this change.



RMDs (required minimum distributions) have been pushed back to age 73 in 2023 (good news for those with “gap years” in income to take advantage of Roth conversions) and to age 75 in 2033.

RMDs will no longer be required from Roths in employer retirement plans. 

A "lost and found" for retirement is supposed to be housed at the Department of Labor within two years. Anyone uncertain if they have an old plan floating about would benefit from this resource.



Starting for the tax year 2023, Simple IRAs and SEP IRAs are allowed to have a Roth IRA option. It will be interesting to see how quickly custodians adopt this change.

401k plans saw a number of changes with highlights listed below:

A focus on increased savings

Starting in 2025, Employers must start automatic contributions for everyone who qualifies to participate at a minimum level of 3% in 401ks with a 1% increase each year. Employees can opt out.

Also in 2025 all new 401k and 403b plans must auto enroll employees who don’t opt out. There is also some wording around plan transferability when leaving employment that will require sponsors to automatically offer portability services to employees with small balances to move accounts to new employers.

Roth 401k changes

Within those plans, employers can now offer retirement subaccounts that can act as emergency savings funds and operates like a Roth account (after-tax funds; tax-free withdrawals). The annual limit is $2,500 per year with up to a 100% match. The first 4 withdrawals any given year would be penalty and tax free.

For our clients who's 401k plans we manage: we are working to find out when these account types will be an option and will be reaching out to you to discuss this option and explain to staff if you decide to implement.

Employees will also have the option to receive their match in Roth accounts (and pay taxes on those matches today). It will probably take some time for plan sponsors and payroll systems to be ready to implement this change.

Student Loan Payment “Matches”

Starting in 2024, Employers can match Student Loan Payments into the Employee’s 401k, treating the student loan payment like a 401k contribution. So for younger employees with student debt who don’t have a lot left to start retirement savings, this can be a head start to saving even if they like the cash flow. Like most benefits this would need to be offered to all employees not just the Associate you want to hire.

Last, starting in 2024 unused 529 funds can now be rolled up into a Roth IRA in the beneficiary’s name (up to a lifetime max of $35,000). This is great if your kid receives a scholarship or has money left over when they graduate. Remember Roth account distributions are not taxed as income.

When I saw this I immediately wanted to know if every client could open a 529 plan for themselves for $35,000 then roll it into a Roth. Not so fast. This rule is for parents who funded 529s for their kids. Funds must have been in the account for at least 15 years and you can't roll contributions from the last 5 years.

Rollovers are also subject to Roth contribution limits, so it would take someone under 50 years old 6 years to fully roll over the $35,000 ($35,000 divided by the $6,500 annual limit). I can only infer that this interferes with the ability to do Roth and backdoor Roth contributions.

In a nutshell: this is a nice add on for extra 529 funds but isn't something that can easily be taken advantage of.



While these are just a few notes from the recent legislation, they are still enough to make anyone's head spin. We'll continue to bring up these changes as they come to fruition. As always please reach out or just reply to this email with any questions you have!

Have a wonderful week,

Natalie and Nicola

P.S.- Hayes Wealth Advisors works exclusively with Optometric Practice owners to help them build wealth outside their practices through customized, industry-specific planning. We have built planning tools to comprehensively answer the questions that face practice owners in today's environment. Our services are available both on a one-off basis or in the context of a full financial plan. Set up a call if you'd like to learn more about how Hayes Wealth Advisors can help you make the best financial decisions for your practice and family.

Helping ODs Build Wealth Outside Their Practice

Hayes Wealth Advisors provides financial planning through a Comprehensive Personal Wealth Action Plan and long term, customized investment management services. Our goal is to help optometric practice owners to build wealth outside their business in such a way that they are able to live life to their fullest regardless of market conditions.

Natalie Hayes Schmook, MBA

Certified Financial Planner™

Certified Valuation Analyst™

Certified Exit Planning Advisor

www.hayeswealthadvisors.com

natalie@hayeswealthadvisors.com

(404) 954-1133

Nicola Pariseau

Wealth Management Specialist^SM

Series 65 License

www.hayeswealthadvisors.com

nicola@hayeswealthadvisors.com

(404) 307-4860