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Secure 2.0 Act of 2022 – Changes to Retirement Savings Accounts

Enacted in 2022, the Secure 2.0 Act codified changes for retirement accounts that may affect your financial plan. Below we summarize some of these major changes. As always, please do not hesitate to reach out to any member of our team with questions or to schedule a meeting to discuss any issue in greater detail.

Rules Effective 2023

New RMD Commencement Age

  • Beginning in 2023, the age at which required minimum distributions must begin increased from 72 to 73. In 2033, the mandatory RMD starting age increases to 75.  Therefore, if you are turning 72 in 2023 (born in 1951), you are not required to take an RMD until 2024.

Relaxed missed RMD Penalty

  • The excise tax imposed for not taking an RMD from a qualified plan or IRA has been reduced from 50% of the required amount not taken to 25%. However, if the under-distribution is corrected in a timely manner, the excise tax is further reduced from 25% to 10%.

Roth option available for employer contributions

  • Currently, employer matching contributions are not permitted on a Roth basis and must be made on a pre-tax basis. Employers now have the option to allow employees to decide whether to take employer matching and nonelective contributions on a pre-tax or Roth after-tax basis. The employer may deduct Roth contributions, but employees take Roth contributions as income.  Contributions and earnings would be subject to normal Roth rules thereafter.

Rules Effective 2024

Required Automatic 401(k) Plan Enrollment

  • Unless employees opt out, new 401(k) and 403(b) plans must automatically enroll participants in the plan with a beginning salary deferral of 3% – 10%. Existing plans will not be subject to this provision.

Required Roth treatment for catch-up contributions.

  • For certain highly compensated employees, catch-up contributions to qualified retirement plans for higher earners are required to be Roth after-tax contributions, even if regular contributions are pretax. Participants with compensation below $145,000 (to be adjusted for inflation) are exempt and can elect pretax or Roth catch-up contributions.

Tax- and penalty-free rollovers from 529 plans to Roth IRAs

  • Up to $35,000 (lifetime limit) in unused 529 funds may be contributed to a Roth IRA in the name of the beneficiary.
  • The 529 plan must be open for greater than 15 years
  • These rollovers will be subject to annual IRA contribution limits.

Student loan payment match

  • Allows employer matching contributions to be made with respect to qualified student loan repayments rather than (or in addition to) employee elective deferrals. Such matching contributions will count toward safe harbor 401(k) plan requirements and safe harbor automatic enrollment 401(k) plan requirements.

Rules Effective 2025

Increased Catch Up Contributions

  • The catch-up contribution maximum for employees age 50+ is $7,500 for 2023 ($3,500 for SIMPLE plans) and adjusted for inflation annually. Beginning in 2025, employees age 60–63 will have a higher catch-up limit — 50% more than the regular catch-up limit or $10,000 more, whichever is greater.

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5C Capital Management, LLC

2 weeks ago

5C Capital Management, LLC
SILICON VALLEY BANK: MANAGING CONTAGION IN THE BANKING SECTOROn March 10, 2023 the FDIC was appointed as receiver of Silicon Valley Bank (“SIVB”) based in Santa Clara, California. This is the largest domestic bank failure in more than a decade. How a bank with a $20 billion equity market cap just a month ago, could collapse so quickly is a stark reminder of how relatively rapid interest rate increases may affect an institution that was ill equipped to handle these conditions. Despite the Fed’s widely telegraphed path for interest rates, SIVB held approximately 78% of its portfolio in longer dated US government backed securities, designating these as “Held to Maturity (HTM)”. This meant that although the value of these securities was negatively impacted by rapidly rising rates, they were not “marked to market”. The balance of its portfolio was held as “Available for Sale (AFS)” which requires daily repricing. If the HTM portfolio was marked-to-market on 9/30/22, the loss would have been 1.35x greater than the bank’s tangible common equity. Banking regulators usually refer to a bank in this condition as insolvent.Please read the full article on our website at: 5cwealth.com/silicon-valley-bank-managing-contagion-in-the-banking-sector/Please do not hesitate to contact us at any time with questions at 347.331.0648 or via email at info@5cwealth.com.#capitalmarkets #commercialrealestate #financialadvisor #financialadvice #retirementplanning #retirementsavings #banking #bankingandfinance ... See MoreSee Less

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5C Capital Management, LLC

2 weeks ago

5C Capital Management, LLC
The Secure 2.0 Act of 2022 brings new rules for managing your retirement assets. Check out our website at 5cwealth.com/secure-2-0-act-of-2022-changes-to-retirement-savings-accounts/ for more information on the updated RMD guidelines.Please do not hesitate to contact us at any time with questions at 347.331.0648.#capitalmarkets #commercialrealestate #financialadvisor #financialadvice #retirementplanning #RetirementSavings #retirement ... See MoreSee Less

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5C Capital Management, LLC

3 months ago

5C Capital Management, LLC
WE WISH YOU A PEACEFUL & HEALTHY 2023.We look towards a stronger 2023, although we expect capital markets to experience greater than normal volatility.2022 was marked by considerable challenges – the war in Ukraine, inflation at a 40-year high, and Covid’s re-emergence in China. Mortgage rates increased greater than 100% during the calendar year, testing residential and commercial real estate valuations. Although this pricing and income drag should persist for the near term, we hope that the Fed’s eventual easing will stabilize the market.The Fed Funds target rate is now between 4.25% – 4.5% after last year’s aggressive rate hikes. We expect the fed to raise again on February 1, hopefully very modestly and with strong guidance on a terminal rate. If inflation continues to ebb and unemployment rises, we expect a recession to follow. However, while there is much disagreement on when and how deep the contraction will be, the prevailing opinion is that it will be short-lived.Read the full article online at: 5cwealth.com/5c-capital-markets-update-january-2023/Please do not hesitate to contact us at any time with questions at 347.331.0648. ... See MoreSee Less

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5C Capital Management, LLC

4 months ago

5C Capital Management, LLC
May your Thanksgiving and all the days ahead be filled with happiness, joy and prosperity. We wish you and yours a happy Thanksgiving.The 5C Capital Management Team#Thanksgiving #gratitude #thankyou #thankful ... See MoreSee Less

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5C Capital Management, LLC

4 months ago

5C Capital Management, LLC
As 2022 closes, we take this opportunity to encourage year-end planning for a smoother transition to 2023. We are pleased to provide our financial planning checklist online at: 5cwealth.com/year-end-planning-checklist/Please do not hesitate to contact us with any questions or to schedule a meeting.New York Office:707 Westchester Avenue Suite 210White Plains NY, 10604(347) 331-0648New Jersey Office:50 Tice Boulevard, Suite A32Woodcliff Lake, NJ 07677(201) 474-0987Main phone # (347) 3310648 5cwealth.com/#planning #financialplanning #financialadvisors #financialhealth ... See MoreSee Less

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New York Office: 707 Westchester Avenue, Suite 210, White Plains, NY 10604 I 347.331.0648 I Fax: 347.331.0647

New Jersey Office: 50 Tice Boulevard, Suite A32 Woodcliff Lake, NJ 07677 I 201.474.0987

Note to All Readers: The information contained herein reflects the views of 5C Capital Management, LLC and sources believed by 5C Capital Management, LLC to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein. There is no guarantee that any projection, forecast or opinion in these materials will be experienced by any client. Past performance is neither indicative of, nor a guarantee of future results. The views expressed herein may change at any time. These materials are provided for information purposes only and may not be construed as investment, legal, tax, accounting, planning and or consulting advice. The information contained herein does not evaluate or make recommendations regarding your specific investment objectives, financial situation and circumstance. When evaluating this material for purposes of making any assessment concerning 5C Capital Management, LLC, consider discussing your specific situation with other professionals prior to making any decision. Any information contained herein may not be construed as 5C Capital Management, LLC sales and or marketing materials and is not an offer or solicitation for the purchase or sale of any financial instrument, product, planning or consulting services sponsored or provided by 5C Capital Management, LLC or any representative of 5C Capital Management, LLC. Any references to specific securities, asset class, planning and consulting considerations are presented solely for illustrative purposes and are not to be considered recommendations by 5C Capital Management, LLC. 5C Capital Management, LLC may have positions in and or may affect transactions in, markets, industry sectors and companies described herein.

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