SECURE 2.0 Act

[seattlecyclone]

The giant omnibus budget bill just dropped. Congress will probably pass it with minimal amendment to avoid a government shutdown and go home for the holidays. Included in this is the "SECURE 2.0 Act" that will make some changes to retirement accounts and the taxation thereof.

Skimming through that section, some changes that popped out at me:
* RMD age raised to age 73 for those who turn 72 after 2022 and who turn 73 before 2033. RMD age raised to age 75 for those who turn 74 in 2033 or later.
* New "Saver's Match" as an incentive for lower-income folks to use retirement accounts. Similar income levels and amounts to the current saver's credit, but potentially better since it's not a non-refundable credit.
* Student loan payments could count as retirement contributions for the purpose of calculating employer matching contributions.
* New ability to roll over up to $35k in unused 529 account balances into the beneficiary's Roth IRA, bit by bit each year in lieu of their annual IRA contribution. Nice little escape hatch for those worried about oversaving in these accounts.
* Tax for failure to take an RMD is reduced from 50% to 25% in general, or 10% if the RMD is taken out within a reasonable time period after the end of the year it was supposed to be removed.
* New ability for victims of domestic abuse to withdraw up to $10k penalty-free from retirement accounts.
* New ability for terminally ill patients (certified by a physician as expected to die within seven years) to take early withdrawals without 10% extra tax.
* Roth SEP and SIMPLE IRAs would be allowed.
* Employees over 50 earning more than $145k at employers with Roth retirement plans must make Roth catch-up contributions instead of pre-tax ones.
* Roth employer matching would become an allowed thing (such matches would be included in employee income that year).

Lots more stuff in there, especially from the administrative side of running retirement plans, but this is what maybe seemed more interesting to members of this community.

[Rubic]

For entirely selfish reasons I'm hoping the SECURE 2.0 Act passes, but there are plenty of other
benefits in the bill which seattlecyclone has listed in favor of it getting through Congress.

[Sugaree]

I'm very curious about the saver's match and how exactly it's going to work.  I assume this is going to mean that I'll have to provide a routing and account number of my IRA in order to get the funds deposited.  And will this match count towards the yearly limit?  I admit that I haven't dug very far into the actual text of the bill yet since it won't take effect until 2027.  For tax years 2023 and 2024, I'm going to be in a weird spot with that credit because filing as a qualified widow carries most of the same benefits as MFJ, except the saver's credit where you have to use the single limit and I just don't think I'll be able to get under that threshold.  After that, I will be able to use the higher HoH limit and can probably squeak under.  So, by 2027 I should be able to take advantage of it. 

There were also a couple of things about catch up contributions, as I recall.  I think the IRA catchup was going to be indexed to inflation starting in 2024.  And increasing the catchup amount for 401ks, maybe? 



ETA:  Having had a chance to dig into the text of the bill, I'm not all that happy about replacing the credit with the match.  The upper limits that are being proposed for 2027 are ~10% lower than the limits would likely be in 2027 after current limits are adjusted for inflation.  For example, the 2023 limit for MFJ is $73k.  Taking into account "normal" inflation of 2% in four years, that limit would be $79k.  The proposed upper limit for the match is $71k for MFJ.  And it would be a true phase out.  Currently, as long as I'm $1 under the highest limit, I get the $200 credit.  In the new scenario, I would get some tiny percentage.  Oh, and it would use MAGI instead of the currently used AGI.  This isn't a huge deal for most people, but also something to keep in mind.  As far as benefiting lower and middle income taxpayers, I do see this as being more aligned to that purpose.  But those of us who were just barely under the current limits are probably not going to benefit from this. 

The IRA catch up is in there and it's pretty much the same as has been proposed since the beginning.  Indexed to inflation starting in 2024.  I like it. 

There's also an interesting part about a higher catchup for people ages 60 through 63.  I didn't dig too deep into that because I plan on popping smoke at 57, but it appears that for those 4 years your catchup limit would be the greater of $10k or 150% of whatever the catchup limit would have been in 2024 after being indexed for inflation.  Which, considering that current catchup is $7500, 150% of that would be $11,250. 

[achvfi]

The giant omnibus budget bill just dropped. Congress will probably pass it with minimal amendment to avoid a government shutdown and go home for the holidays. Included in this is the "SECURE 2.0 Act" that will make some changes to retirement accounts and the taxation thereof.

Skimming through that section, some changes that popped out at me:
* RMD age raised to age 73 for those who turn 72 after 2022 and who turn 73 before 2033. RMD age raised to age 75 for those who turn 74 in 2033 or later.
* New "Saver's Match" as an incentive for lower-income folks to use retirement accounts. Similar income levels and amounts to the current saver's credit, but potentially better since it's not a non-refundable credit.
* Student loan payments could count as retirement contributions for the purpose of calculating employer matching contributions.
* New ability to roll over up to $35k in unused 529 account balances into the beneficiary's Roth IRA, bit by bit each year in lieu of their annual IRA contribution. Nice little escape hatch for those worried about oversaving in these accounts.
* Tax for failure to take an RMD is reduced from 50% to 25% in general, or 10% if the RMD is taken out within a reasonable time period after the end of the year it was supposed to be removed.
* New ability for victims of domestic abuse to withdraw up to $10k penalty-free from retirement accounts.
* New ability for terminally ill patients (certified by a physician as expected to die within seven years) to take early withdrawals without 10% extra tax.
* Roth SEP and SIMPLE IRAs would be allowed.
* Employees over 50 earning more than $145k at employers with Roth retirement plans must make Roth catch-up contributions instead of pre-tax ones.
* Roth employer matching would become an allowed thing (such matches would be included in employee income that year).

Lots more stuff in there, especially from the administrative side of running retirement plans, but this is what maybe seemed more interesting to members of this community.

Wow so many changes.
529 roll over is interesting.
I thought RMD age will update to 75 for everyone. Sounds like 10 year delay is compromise to reduce bill cost.

[seattlecyclone]

Nice analysis of the saver's match. I hadn't really read through the particulars of that credit on my initial pass through the bill.

You're right about the MAGI thing: the match will now consider AGI without regard to any reduction for retirement contributions, so no more maxing out the pre-tax 401(k) instead of Roth to get more of a match/credit.

You're also right about inflation: the inflation adjustments for the match are based on 2026 dollars. Looking at the 2022 form for the credit, a married couple gets the maximum amount up to $41k, and something up to $68k, and that's in 2022 dollars. Under the new bill a married couple would get the maximum amount up to that same $41k (but in 2026 dollars this time), and something up to $71k.

Putting all this together, the change to a saver's match seems like a win for people in the portion of the income range who would get the full credit or close to it (since nobody gets the full $1,000 today), while people toward the top of the range (especially those who only qualify due to AGI reductions from retirement contributions) will be slightly worse off.

[Sugaree]

Nice analysis of the saver's match. I hadn't really read through the particulars of that credit on my initial pass through the bill.

You're right about the MAGI thing: the match will now consider AGI without regard to any reduction for retirement contributions, so no more maxing out the pre-tax 401(k) instead of Roth to get more of a match/credit.

You're also right about inflation: the inflation adjustments for the match are based on 2026 dollars. Looking at the 2022 form for the credit, a married couple gets the maximum amount up to $41k, and something up to $68k, and that's in 2022 dollars. Under the new bill a married couple would get the maximum amount up to that same $41k (but in 2026 dollars this time), and something up to $71k.

Putting all this together, the change to a saver's match seems like a win for people in the portion of the income range who would get the full credit or close to it (since nobody gets the full $1,000 today), while people toward the top of the range (especially those who only qualify due to AGI reductions from retirement contributions) will be slightly worse off.

As I recall, traditional contributions to a 401k will reduce MAGI, but IRA contributions don't, so that helps some especially if you are maxing out traditional 401k and using a Roth IRA.  MAGI is also not reduced by, among other things, student loan interest, non-taxable social security payments, and rental losses.  Those things all reduce the AGI.  Those would be of interest to this community, I would think. 

[seattlecyclone]

Nice analysis of the saver's match. I hadn't really read through the particulars of that credit on my initial pass through the bill.

You're right about the MAGI thing: the match will now consider AGI without regard to any reduction for retirement contributions, so no more maxing out the pre-tax 401(k) instead of Roth to get more of a match/credit.

You're also right about inflation: the inflation adjustments for the match are based on 2026 dollars. Looking at the 2022 form for the credit, a married couple gets the maximum amount up to $41k, and something up to $68k, and that's in 2022 dollars. Under the new bill a married couple would get the maximum amount up to that same $41k (but in 2026 dollars this time), and something up to $71k.

Putting all this together, the change to a saver's match seems like a win for people in the portion of the income range who would get the full credit or close to it (since nobody gets the full $1,000 today), while people toward the top of the range (especially those who only qualify due to AGI reductions from retirement contributions) will be slightly worse off.

As I recall, traditional contributions to a 401k will reduce MAGI, but IRA contributions don't, so that helps some especially if you are maxing out traditional 401k and using a Roth IRA.  MAGI is also not reduced by, among other things, student loan interest, non-taxable social security payments, and rental losses.  Those things all reduce the AGI.  Those would be of interest to this community, I would think. 

"MAGI" is an overloaded term that has a different meaning for different parts of the tax code. It's the AGI, Modified for whatever purposes the writers of that particular tax law thought were a good idea. For example the MAGI for determining whether you can deduct your IRA contributions excludes the actual deduction for IRA contributions, while the MAGI for ACA subsidies doesn't exclude this figure.

This particular MAGI for the new saver's match "means adjusted gross income...determined without regard to any exclusion or deduction allowed for any qualified retirement savings contribution made during the taxable year." "Qualified retirement savings contributions" are defined earlier in the section to include IRA contributions and various employer plan contributions. Seems pretty clear the intent is to add any pre-tax retirement contributions back into the AGI for the purpose of calculating this match.

[Sugaree]

Nice analysis of the saver's match. I hadn't really read through the particulars of that credit on my initial pass through the bill.

You're right about the MAGI thing: the match will now consider AGI without regard to any reduction for retirement contributions, so no more maxing out the pre-tax 401(k) instead of Roth to get more of a match/credit.

You're also right about inflation: the inflation adjustments for the match are based on 2026 dollars. Looking at the 2022 form for the credit, a married couple gets the maximum amount up to $41k, and something up to $68k, and that's in 2022 dollars. Under the new bill a married couple would get the maximum amount up to that same $41k (but in 2026 dollars this time), and something up to $71k.

Putting all this together, the change to a saver's match seems like a win for people in the portion of the income range who would get the full credit or close to it (since nobody gets the full $1,000 today), while people toward the top of the range (especially those who only qualify due to AGI reductions from retirement contributions) will be slightly worse off.

As I recall, traditional contributions to a 401k will reduce MAGI, but IRA contributions don't, so that helps some especially if you are maxing out traditional 401k and using a Roth IRA.  MAGI is also not reduced by, among other things, student loan interest, non-taxable social security payments, and rental losses.  Those things all reduce the AGI.  Those would be of interest to this community, I would think. 

"MAGI" is an overloaded term that has a different meaning for different parts of the tax code. It's the AGI, Modified for whatever purposes the writers of that particular tax law thought were a good idea. For example the MAGI for determining whether you can deduct your IRA contributions excludes the actual deduction for IRA contributions, while the MAGI for ACA subsidies doesn't exclude this figure.

This particular MAGI for the new saver's match "means adjusted gross income...determined without regard to any exclusion or deduction allowed for any qualified retirement savings contribution made during the taxable year." "Qualified retirement savings contributions" are defined earlier in the section to include IRA contributions and various employer plan contributions. Seems pretty clear the intent is to add any pre-tax retirement contributions back into the AGI for the purpose of calculating this match.

Yuck.  I missed that.  Oh well, the credit was nice while it lasted.  Though I fully admit that I was never the intended target for that particular credit.

[Tigerpine]

I found this link in a news article about the omnibus appropriations bill.  It runs down everything included in the Secure 2.0 Act.

https://www.irionline.org/wp-content/uploads/2022/12/GA_SECURE-2.0-Act-of-2022_Section-by-Section-Summary-FINAL.pdf

[RWTL]

I found this link in a news article about the omnibus appropriations bill.  It runs down everything included in the Secure 2.0 Act.

https://www.irionline.org/wp-content/uploads/2022/12/GA_SECURE-2.0-Act-of-2022_Section-by-Section-Summary-FINAL.pdf

Great summary.

[Turtle]

The one that will effect me the most is the raise in RMD age.  Only about 20% of my total retirement accounts are in Roth, so the extra years of breathing room will be helpful in planning to avoid the Medicare cliff.

(Assuming decent market recovery between now and then, of course)

Edit to add -- the increase in catch up over 60 could be interesting for one year -- depending on whether that's allowed the year a person turns 60, or only after the birthday has passed.  Provided I hang around until that year, it would be nice to have a higher limit to front load at the beginning before I retire part way through. 

[Gin1984]

Section 603, Elective deferrals generally limited to regular contribution limit. Under current
law, catch-up contributions to a qualified retirement plan can be made on a pre-tax or Roth basis
(if permitted by the plan sponsor). Section 603 provides all catch-up contributions to qualified
retirement plans are subject to Roth tax treatment, effective for taxable years beginning after
December 31, 2023. An exception is provided for employees with compensation of $145,000 or
less (indexed).

This could cause an issue for some people.

[Tigerpine]

Section 603, Elective deferrals generally limited to regular contribution limit. Under current
law, catch-up contributions to a qualified retirement plan can be made on a pre-tax or Roth basis
(if permitted by the plan sponsor). Section 603 provides all catch-up contributions to qualified
retirement plans are subject to Roth tax treatment, effective for taxable years beginning after
December 31, 2023. An exception is provided for employees with compensation of $145,000 or
less (indexed).

This could cause an issue for some people.

This is an interesting provision, isn't it?  It looks like Congress decided they want their tax payments on the makeup contributions up front.  This will likely mean for most people making catchup contributions, they will be paying at a higher tax rate than they would on taking out the same money if it had been contributed on a pre-tax basis.

Not only would catchup contributions all be given Roth tax treatment, but the amount one will be able to contribute will increase, per Sections 108 and 109.  Further, Roth designation accounts in employer sponsored plans will no longer be subject to RMDs starting in 2024.  In addition, the penalty will be reduced for not making RMDs from 50% to 25% (or as low as 10% under some circumstances!)

I've heard it wondered whether Congress might someday take away Roth status from such accounts at some point in the future, but this bill is clearly going in the opposite direction.  It wouldn't surprise me if some day Roth accounts become the standard retirement account vehicle, based on this bill's content.
On the flip side,


Section 604, Optional treatment of employer matching or nonelective contributions as Roth contributions. Under current law, plan sponsors are not permitted to provide employer matching contributions in their 401(k), 403(b), and governmental 457(b) plans on a Roth basis. Matching contributions must be on a pre-tax basis only. Section 604 allows defined contribution plans to provide participants with the option of receiving matching contributions on a Roth basis, effective on the date of enactment of this Act.

[achvfi]

Was SECURE 2.0 Act part of funding bill passed by senate today?

[dandarc]

Was SECURE 2.0 Act part of funding bill passed by senate today?

Yes.

[Silrossi46]

* Employees over 50 earning more than $145k at employers with Roth retirement plans must make Roth catch-up contributions instead of pre-tax ones.

Does anyone know if the 145k is gross income or is it agi?

Also for 457b governmental plans that allow for 3 year special double catch-up provision does that change the double portion of the total amount to a Roth contribution??

[seattlecyclone]

* Employees over 50 earning more than $145k at employers with Roth retirement plans must make Roth catch-up contributions instead of pre-tax ones.

Does anyone know if the 145k is gross income or is it agi?

Neither. The $145k amount is wages from that employer in the prior year. Income from other sources doesn't factor into it.

Also for 457b governmental plans that allow for 3 year special double catch-up provision does that change the double portion of the total amount to a Roth contribution??

This provision modifies IRC section 415(v). This section establishes the catch-up contributions for employer plans and does generally apply to 457 plans except for years in which the 457 has a higher catch-up limit under section 457(b)(3). That section describes the double catch-up contributions you're talking about, that are available for up to three years before the plan's designated retirement age. Seems to me from my reading of this code that higher-earning employees could still make pre-tax catch-up contributions to the 457 for the 1-3 years in which those higher limits apply, but not for any other years.

[Silrossi46]

Thank you for the reference and clarification.

[stoaX]

The giant omnibus budget bill just dropped. Congress will probably pass it with minimal amendment to avoid a government shutdown and go home for the holidays. Included in this is the "SECURE 2.0 Act" that will make some changes to retirement accounts and the taxation thereof.

Skimming through that section, some changes that popped out at me:
* RMD age raised to age 73 for those who turn 72 after 2022 and who turn 73 before 2033. RMD age raised to age 75 for those who turn 74 in 2033 or later.
* New "Saver's Match" as an incentive for lower-income folks to use retirement accounts. Similar income levels and amounts to the current saver's credit, but potentially better since it's not a non-refundable credit.
* Student loan payments could count as retirement contributions for the purpose of calculating employer matching contributions.
* New ability to roll over up to $35k in unused 529 account balances into the beneficiary's Roth IRA, bit by bit each year in lieu of their annual IRA contribution. Nice little escape hatch for those worried about oversaving in these accounts.
* Tax for failure to take an RMD is reduced from 50% to 25% in general, or 10% if the RMD is taken out within a reasonable time period after the end of the year it was supposed to be removed.
* New ability for victims of domestic abuse to withdraw up to $10k penalty-free from retirement accounts.
* New ability for terminally ill patients (certified by a physician as expected to die within seven years) to take early withdrawals without 10% extra tax.
* Roth SEP and SIMPLE IRAs would be allowed.
* Employees over 50 earning more than $145k at employers with Roth retirement plans must make Roth catch-up contributions instead of pre-tax ones.
* Roth employer matching would become an allowed thing (such matches would be included in employee income that year).

Lots more stuff in there, especially from the administrative side of running retirement plans, but this is what maybe seemed more interesting to members of this community.

Thanks as always for your summary!

[secondcor521]

Was SECURE 2.0 Act part of funding bill passed by senate today?

Yes.

And it appears that it was signed by President Biden last Friday, which was the day that the stopgap funding measure expired.  So it's now law, although congress.gov hasn't caught up yet with the paperwork.

For those born in 1959, there is a glitch in the text of the bill regarding the increase in the required beginning date for RMDs.  The way the text is written, your applicable age is 73 *and* 75.  There will likely be a technical correction to this at some point.

[achvfi]

Was SECURE 2.0 Act part of funding bill passed by senate today?

Yes.

And it appears that it was signed by President Biden last Friday, which was the day that the stopgap funding measure expired.  So it's now law, although congress.gov hasn't caught up yet with the paperwork.

For those born in 1959, there is a glitch in the text of the bill regarding the increase in the required beginning date for RMDs.  The way the text is written, your applicable age is 73 *and* 75.  There will likely be a technical correction to this at some point.

Thanks! 1959 is my in-laws birth year. It is confusing if he qualifies for 75 or not.

[secondcor521]

I was wrong about President Biden signing it though.

He signed another short term funding measure that funds the government through this Friday 12/30, and he says he fully intends to sign the 2023 omnibus spending bill (which contains SECURE 2.0 plus funding the government plus some other miscellaneous items).

I think it will get done, but technically I have jumped the gun at this point.

[achvfi]

I was wrong about President Biden signing it though.

He signed another short term funding measure that funds the government through this Friday 12/30, and he says he fully intends to sign the 2023 omnibus spending bill (which contains SECURE 2.0 plus funding the government plus some other miscellaneous items).

I think it will get done, but technically I have jumped the gun at this point.

Yeah sounds like a done deal.

[Paul der Krake]

I have about 5k in a 529 for which I am both the owner and the beneficiary. Very curious to see how the IRS ends up defining "left over" money. I mean, I did go to college, but that was before I funded the 529 so... Do I get a free rollover or nah?

[secondcor521]

I have about 5k in a 529 for which I am both the owner and the beneficiary. Very curious to see how the IRS ends up defining "left over" money. I mean, I did go to college, but that was before I funded the 529 so... Do I get a free rollover or nah?

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

[Paul der Krake]

I have about 5k in a 529 for which I am both the owner and the beneficiary. Very curious to see how the IRS ends up defining "left over" money. I mean, I did go to college, but that was before I funded the 529 so... Do I get a free rollover or nah?

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Thanks for the summary and saving me a dense read!

Sounds like I'll have to wait another ~10 years in order to hit the 15 year minimum wait. If nothing changes, that is.

[UyEfQkt]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

[Sugaree]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf

[secondcor521]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf

And here's a post at another board tracing the earned income requirement:

https://www.bogleheads.org/forum/viewtopic.php?p=7032204#p7032204

[UyEfQkt]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf

And here's a post at another board tracing the earned income requirement:

https://www.bogleheads.org/forum/viewtopic.php?p=7032204#p7032204

That is very helpful, thanks. Sad that it ruins my plans to skirt the earned income limits on Roth IRA contributions but makes sense.

[secondcor521]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf

And here's a post at another board tracing the earned income requirement:

https://www.bogleheads.org/forum/viewtopic.php?p=7032204#p7032204

That is very helpful, thanks. Sad that it ruins my plans to skirt the earned income limits on Roth IRA contributions but makes sense.

Lots of people are trying to find loopholes in this new law.  There don't seem to be any I can see.

If you are over the MAGI limits on Roth contributions, you can perhaps do a backdoor Roth (unless you have an existing traditional IRA with a decent balance).

If you're below the MAGI limits and just want more in your Roth, then I'd say just take the money you were going to put in the 529 and put it in your Roth now (assuming you also have the earned income now to make the contribution).

[Sugaree]

If you meet the criteria, of course you do.

You can read them in the law, or read a post I made on another board earlier today for a (hopefully complete) summary:

https://www.early-retirement.org/forums/f28/converting-529-to-roth-ira-116460.html#post2875360

Your post says that you must have earned income to support the rollover same as a contribution. I've not read that in any other summary. The would kill my idea of creating one of these for myself, letting it sit for 15 years, and rolling into a Roth IRA. I don't have much earned income now and don't plan to have any in 15 years.

Where are you find the actual text of the law. All my searches find are various summaries and even the House and Senate sites I can only find various introduced bills; not the text of what was actually signed into law.

https://www.congress.gov/117/bills/hr2617/BILLS-117hr2617enr.pdf

And here's a post at another board tracing the earned income requirement:

https://www.bogleheads.org/forum/viewtopic.php?p=7032204#p7032204

That is very helpful, thanks. Sad that it ruins my plans to skirt the earned income limits on Roth IRA contributions but makes sense.

Lots of people are trying to find loopholes in this new law.  There don't seem to be any I can see.

If you are over the MAGI limits on Roth contributions, you can perhaps do a backdoor Roth (unless you have an existing traditional IRA with a decent balance).

If you're below the MAGI limits and just want more in your Roth, then I'd say just take the money you were going to put in the 529 and put it in your Roth now (assuming you also have the earned income now to make the contribution).

I'm not seeing any great loopholes, but I do see it as a good way to get my kid started out in life.  I'm definitely less concerned with overfunding his 529 now (I'm already maxing out my own TSP, IRA, and HSA)

[secondcor521]

I'm not seeing any great loopholes, but I do see it as a good way to get my kid started out in life.  I'm definitely less concerned with overfunding his 529 now (I'm already maxing out my own TSP, IRA, and HSA)

Agreed.  I like this new provision in the law.  I have three kids who collectively probably have overfunded 529s.  I will recommend they use this new provision if they don't want to use it for their own grad school or their kids' educations.

It will be interesting to see how they handle people who rolled 529s down from elder children to younger children.  I fortunately opened three different accounts for my three kids and have kept those accounts open in their names the entire time, so I'm OK with the 15 year time frame.  But I also think that people who rolled down the 529 from kid to kid should be able to use the provision.  That may open it up to unintended use though - roll it down from kid to kid to kid, then roll it back to a parent and roll it over to the parent's Roth is clearly not what was intended.

[jpdx]

SECURE 2.0 has also clarified how to handle inherited IRAs. Details here.

[achvfi]

SECURE 2.0 has also clarified how to handle inherited IRAs. Details here.

Your link had extra characters. Thanks for posting
https//www.freestonecapital.com/insights/secure-act-and-inherited-iras-the-clarity-youve-been-looking-for/%22