Secure 2.0 Raises Roth IRA Contribution Limits

Secure 2.0 Raises Roth IRA Contribution Limits The Secure Act 2.0, passed in late December, includes provisions that will make the tax-free savings of a Roth IRA even more attractive. Named for Sen. William Roth, the Roth IRA was created as part of the Taxpayer Relief Act of 1997 and has since become a popular way to save for retirement.

For 2023, a participating employee can contribute up to $22,500 in elective deferrals or up to $30,000 if they are age 50 or over. This is an increase of $500 and $1000 respectively, from the previous year. This is a great news for those who already have a Roth IRA, or are looking to open one and take advantage of the tax-free savings.

The Secure Act 2.0 also includes provisions that will help those who already have funds in an IRA. Starting in 2024, Americans can roll over unused college savings from a 529 plan into a beneficiary's Roth IRA with no penalty. This is a great way to help fund your retirement without having to pay the 10% penalty that normally applies to 529 plans.

Another provision of the Secure Act 2.0 is the ability to convert IRA funds to Roth without incurring the 10% penalty. Some people balk at paying now to convert IRA funds to Roth, even if that avoids future taxes on growth. However, with the Secure Act 2.0, this penalty is waived, making it easier to convert IRA funds to a Roth IRA.

Additionally, the Secure Act 2.0 provides a Roth conversion ladder which allows you to access retirement funds sooner without penalty. To use this ladder, you need to put it into motion early, so you can reap the benefits of tax-free growth.

The Secure Act 2.0 is bringing many changes and planning opportunities for those looking to save for retirement. Whether you're looking to save for retirement, or just want to take advantage of the tax-free savings of a Roth IRA, this is a great time to do so.