Roth-O-Mania!

Monday, January 23, 2023

By Sarah Brenner, JD
Director of Retirement Education
Follow Us on Twitter: @theslottreport

SECURE 2.0 is now the law of the land and one thing is very clear. Roth-O-Mania is here! In their quest for more revenue, Congress has created more options to save with Roth accounts. These accounts bring in the immediate revenue that Congress desperately needs. For retirement savers, these Roth options offer the promise of potential tax-free earnings and withdrawals down the road.

Here are 5 new Roth savings opportunities brought by SECURE 2.0:

1. Roth SEPs and SIMPLEs. Beginning in 2023, SEP and SIMPLE plans can allow Roth contributions. This is great news if you are a small employer. Now these easy and inexpensive retirement plans can offer a Roth option. You may need to be a little patient here. The logistics involved in getting SEP and SIMPLE Roth plans off the ground likely will mean that custodians will not have these options immediately available.

2. Roth Employer Matches. Prior to SECURE 2.0, employer matching contributions to a plan had to be made on a pretax basis. The new law changes this and allows plans to offer employees the option of having matching contributions made to a Roth account. If your employer makes a Roth matching contribution, you will pay income tax on it. This provision is effective for 2023.

3. Rollovers from 529 Plans to Roth IRAs. SECURE 2.0 allows rollovers from 529 plans to Roth IRAs. This provision is effective in 2024. If you had concerns about what to do with funds left over in a 529 plan, this may be a good opportunity. Leftover 529 funds can now be rolled over to a Roth IRA in the name of the 529 beneficiary. However, there are restrictions. For example, the 529 plan must have been in place for 15 years, annual rollovers cannot exceed the annual Roth IRA contribution limit, and total lifetime rollovers cannot exceed $35,000.

4. No Lifetime RMDs for Roth plans. Unlike Roth IRAs, Roth accounts in workplace plans have been subject to RMDs during the owner’s lifetime. Beginning in 2024, this will no longer be the case. Your Roth plan dollars will be excluded from the RMD calculation.

5. More Roth Catch-Up Contributions. As you get closer to retirement, the rules allow you to step up your retirement plan contributions. Starting in 2024, if you are higher income, age-50 or older, and you want to make catch-up plan contributions, you must make them as Roth contributions.

 

Posted in: , , , , , , , , ,

Content Citation Guidelines

Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.

Please be advised that prior to distributing re-branded content, you must send a proof to [email protected] for approval.

For white papers/other outflow pieces:

Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC – depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.

For charts:

Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.

For Slott Report articles:

Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.

Please contact Matt Smith at [email protected] or (516) 536-8282 with any questions.