Javascript is not enabled.

Javascript must be enabled to use this site. Please enable Javascript in your browser and try again.

Skip to content
Content starts here
Leaving Website

You are now leaving and going to a website that is not operated by AARP. A different privacy policy and terms of service will apply.

A Saver’s Guide to SECURE 2.0

How, and when, the new federal law changes the game for retirement savings

spinner image watering investment plant with watering can of coins
Getty Images

Saving for the future is becoming easier, thanks in part to a major overhaul of federal policies governing retirement plans. 

SECURE 2.0, enacted as part of the spending bill passed by Congress and signed by President Joe Biden in late 2022, includes 92 provisions related to 401(k)s, individual retirement accounts (IRAs) and other savings vehicles. 

spinner image Image Alt Attribute

AARP Membership

Join AARP for $12 for your first year when you sign up for Automatic Renewal. Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP The Magazine

Join Now

Building upon the foundation laid three years earlier by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, SECURE 2.0 “is one of the biggest changes to retirement laws in the last 30 years,” says Derek A. Miser, chief executive officer of Miser Wealth Partners in Knoxville, Tennessee.

Enacted with support from AARP, the key provisions of SECURE 2.0 aim to bolster Americans’ opportunities to save for retirement and to draw income from those funds later in life. Some are already in effect; more will be phased in over the next several years. Here are some of the ways the measure might have the most impact on your ability to save.

Changes for 2023

These provisions are in effect now.

New rules for RMDs: Once you reach a certain age, federal law mandates annual withdrawals from most types of tax-deferred retirement accounts. The idea is to ensure you receive and are taxed on your retirement funds in your lifetime — which is what they were intended for — rather than passing the money to your heirs. The original SECURE Act raised the age when you must start taking these minimum distributions (RMDs) from 70½ to 72; SECURE 2.0 raised it again, to 73.

The new bill also reduces the excise tax for failing to take the required distribution in a given year. In the past, the penalty was 50 percent of the difference between how much you were supposed to take out and how much you did take. Under SECURE 2.0, it is now 25 percent, and can be cut to 10 percent if you act quickly to make up the missing amount.

Penalty-free early withdrawals: If you take money out of your retirement accounts before you turn 59½, you typically must pay a 10 percent penalty tax on top of the regular income tax you owe on the money. There are limited circumstances in which you can avoid the penalty; SECURE 2.0 added to the list, eliminating the extra tax on early withdrawals if:

  • You are terminally ill.
  • You take up to $22,000 for losses related to a federally declared disaster. Regular income taxes on such a withdrawal can be spread over three years. The rules are retroactive to cover disasters occurring on or after January 26, 2021.

Tax-free withdrawal of employer match contributions: Previously, if your company offered a traditional 401(k) with an employer match, taxes on the matching funds would be deferred until you withdrew the money from the account in retirement. Now plan administrators can give employees the option of having the matching contributions taxed in the years they are made, as is the case with Roth 401(k)s. That way, those employer contributions are tax-free when you withdraw them in retirement.

Changes in 2024

Bigger catch-up contributions: There are limits to how much you can put in an IRA each year. For 2023, the limit is $6,500, but people age 50 and older can add a “catch-up” contribution of up to $1,000. From the 2024 tax year on, the catch-up limit for IRAs will be indexed to inflation so that older adults will be able to save more as the cost of living increases.

Flowers & Gifts

Coupons for Local Stores

Save on clothing, gifts, beauty and other everyday shopping needs

See more Flowers & Gifts offers >

Retirement help for those with student debt: People who have difficulty socking away money for retirement because they’re paying off student loans may still take advantage of an employer matching benefit. SECURE 2.0 will allow employers to make matching contributions to an employee’s retirement account when the worker makes a payment on a student loan. The rule applies to 401(k)s, 403(b)s and SIMPLE IRAs.

More penalty-fee early withdrawals: If you have “unforeseeable or immediate” financial needs due to a personal or family emergency, you will be able to take up to $1,000 from a tax-deferred retirement account such as an IRA or a 401(k) without paying the 10 percent penalty. 

These emergency withdrawals are limited to one a year, and you would not be able to make another for three years — unless you elect to treat the distribution as a loan from your account. In that case, you would have to repay the money within three years and could make another emergency withdrawal once you have done so. You will not owe any taxes on the money if you repay within three years.

Workplace emergency savings: Workers tapped retirement accounts to cover emergency expenses at record rates in 2022, according to data from Fidelity and Vanguard, two of the biggest plan providers. SECURE 2.0 may help workers avoid that difficult choice by enabling employers to offer them self-funded emergency savings accounts. The provision only applies to emergency accounts directly linked to an employee’s retirement plan. 

Starting in 2024, employers can automatically enroll qualifying workers (those who made less than $150,000 in 2023) in these rainy-day accounts and direct up to 3 percent of their salary into them. Employees can choose to opt out. The employer can set a cap of up to $2,500 for the emergency fund; contributions beyond that can be directed into the worker’s retirement account.

No RMDs for Roth 401(k)s: Owners of Roth IRAs don’t have to take required minimum distributions, but employees with workplace Roth accounts do — until the 2024 tax year, in which job-based Roths also become RMD-exempt.

RMDs for surviving spouses: If your spouse dies and had a retirement account, you have various options for taking it over — for example, as an inheritance or a rollover into your own IRA. These have implications for when and how you take RMDs from those funds.

Starting in 2024, you have another choice: to be treated as your spouse would have been for RMD purposes. Depending on your and your late partner’s ages and financial circumstances, this could have advantages in terms of when you must start taking distributions and how they are calculated.

Finding lost retirement savings: When people leave a job, they may lose track of their retirement accounts if they don’t roll the money over into a new plan. SECURE 2.0 directs the U.S. Labor Department to launch a searchable national database of retirement plans by the end of 2024 to serve as a lost and found and help people claim their money.

Changes in 2025

Auto-enrollment in retirement plans: Research has shown that people are significantly more likely to participate in a retirement plan if they don’t have to enroll themselves. As of Jan. 1, 2025, employers who start new 401(k) and 403(b) plans must automatically enroll employees and have between 3 percent and 10 percent of their pay directed into their retirement accounts. 

spinner image membership-card-w-shadow-192x134


Get instant access to members-only products and hundreds of discounts, a free second membership, and a subscription to AARP the Magazine.

This provision also has an auto-escalation component, adding 1 percent per year of a worker’s pay to their retirement contributions, up to an employer-set cap that can be from 10 percent to 15 percent of earnings. Employees can opt out or change the contribution level at any time. 

Higher catch-up limit for people nearing retirement: Currently catch-up contributions are one size fits all — the same limit applies to everyone age 50-plus. In 2023, for most IRAs, that’s $7,500. As of 2025, people ages 60 to 63 will be able to make bigger catch-up contributions — up to $10,000 or 50 percent more than the age-50 limit, whichever is greater. 

In addition, those higher limits will be subject to annual cost-of-living adjustments, meaning contributions can increase with inflation. 

Expanded access for part-time workers: The original SECURE Act established that employers who offer a 401(k) must allow part-time staff to enroll if they work at least 1,000 hours for one year or 500 hours for three consecutive years. SECURE 2.0 will reduce the three-year rule to two years, giving more part-timers a savings option. 

Penalty-free withdrawals for long-term care insurance: A 65-year-old has a 69 percent chance of needing long-term care services in their lifetime, according to the U.S. Department of Health and Human Services. Effective Dec. 29, 2025, or three years after SECURE 2.0 was enacted, savers will be able to take up to $2,500 a year from retirement accounts to pay the premiums for certain long-term care insurance plans, subject to income taxes but without the 10 percent early-withdrawal penalty. 

Changes in 2027

Federal match for retirement contributions: To further incentivize retirement saving by low- and middle-income Americans, the federal government will match up to 50 percent of their retirement plan contributions of up to $2,000 and deposit the money into the saver’s retirement plan, starting with the 2027 tax year.

This Saver’s Match will phase out at higher income levels. Taxpayers with an adjusted gross income (AGI) of less than $20,500 ($41,000 for a married couple filing jointly) will be eligible to get the full 50 percent. Those making up to $35,500 (individual) or $71,000 (couple) can get a reduced match. After 2027 the limits will be subject to cost-of-living increases.

The Saver’s Match enhances the existing Saver’s Credit, a nonrefundable tax credit available to low- and middle-income people who contribute to qualified retirement plans. The Saver’s Match contribution will be paid directly into the taxpayer’s retirement account rather than as a tax refund, and it will be refundable, meaning it can turn a tax bill into a refund.

Changes in 2033

RMD age increases again: After a decade at 73, the age at which you must start taking required minimum distributions will go up again, to age 75.

Discover AARP Members Only Access

Join AARP to Continue

Already a Member?