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Secure 2.0 Act changes start going into effect this year. Here's what you need to know

This week we're discussing the Secure 2.0 Act and its impact on college savings accounts.

MOLINE, Ill. — On Dec. 29, President Joe Biden signed the Secure 2.0 Act into law. The new law expands upon the Secure Act of 2019 which made sweeping changes to rules and restrictions on many savings accounts and retirement plans such as 401(k)s, IRAs and Roth IRAs. 

Some changes take effect in 2023 while others will be gradually rolled out over the next 10 years.

News 8's Ann Sterling spoke with Quad Cities Investment Group's Mark Grywacheski to break down what the changes are and what they mean for folks' wallets. 

Sterling: For parents, one of the big changes from this new law governs 529 college savings accounts. What changes do parents need to be aware of in how they manage these accounts?

Grywacheski: Rules, contribution limits and the tax benefits that govern 529 accounts vary from one state to the next, but in general, 529s provide a tax-advantaged way for parents to save for their children’s education expenses.

In Illinois, each parent can contribute and receive a state tax deduction of up to $10,000 per year. In Iowa, that amount is $3,785 per child, per parent.

That money can be invested and grow tax-free to pay for qualified educational expenses for college or trade/vocational schools. But if a child doesn’t go to college/trade school, what do the parents do with that money? 


  • They could change the beneficiary to another child or family member, or
  • If they cashed it out, they’d have to pay taxes and a 10% penalty on any earnings.
Credit: Quad Cities Investment Group

But starting in 2024:

  • Parents can roll over a lifetime amount of $35K from the 529 account into the beneficiary’s Roth IRA.
  • The money must have been in the 529 account for at least 15 years. Also, you can’t roll any contributions from the last 5 years.
  • Rollover is subject to contribution limits which are $6,500 for those under 50 years old and $7,500 for those 50 and older in 2023.

This new law provides some much-needed flexibility to parents in how they manage these 529 accounts.

Credit: Quad Cities Investment Group

Sterling: Another element of the Secure 2.0 Act is it changes many of the rules for Required Minimum Distributions on many retirement accounts. What are the new requirements under this new law?

Grywacheski: Before this new law, the IRS mandated that in the year you turn age 72, you needed to start taking annual required distributions or withdrawals from your IRA and tax-deferred retirement accounts.

  • But effective Jan. 1 of this year, the age at which you must start taking those RMDs changes from 72 to 73.
  • Effective Jan. 1 of 2033, the age then increases to 75.
  • But also effective Jan. 1 of this year, you’re no longer required to take RMDs from your Roth 401(K) account.

But note, a Roth 401(K) is different than a regular 401(K), which is still subject to RMDs.

  • Effective Jan. 1 of this year, it reduces the IRS penalty tax from 50% to 25% for failing to take your RMD in a timely manner.

Sterling: One of the more interesting aspects of this law is that the Labor Department will create a national online database for lost and found retirement plans. What can you tell us about this new feature?

Grywacheski: The Department of Labor estimates that the average person will hold 12 different jobs over their lifetime. Potentially, that can be a lot of different retirement plans that a person may contribute to. So, this online database can help people identify or track down retirement plans that they lost track of or simply forgot about.

Quad Cities Investment Group is a Registered Investment Adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.

Watch more 'Your Money with Mark' segments on News 8's YouTube channel

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