More SECURE 2.0 Retirement Enhancements Kick in This Year

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Starting this year, the SECURE 2.0 Act introduces several important changes that can significantly impact your retirement savings. Here’s what you need to know to make the most of these new provisions:

Automatic enrollment in retirement plans. Beginning this year, new 401(k) and 403(b) plans will automatically enroll eligible employees. This means that if you start a new job or your company starts a new workplace retirement plan, you’ll be automatically enrolled in the plan with a contribution rate of at least 3%, which can increase annually up to 15%. This feature helps ensure that you start saving for retirement right away, even if you don’t take any action.

Higher catch-up contributions. If you’re age 60 to 63, you’ll be able to make higher catch-up contributions to your retirement plan starting this year. The new limit will be the greater of $10,000 or 50% more than the regular catch-up amount. This change is designed to help those nearing retirement age boost their savings.

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Improved access for part-time workers. SECURE 2.0 reduces the participation requirement for long-term, part-time workers from three years to two years. This means that if you work part-time for a long period, you’ll be able to participate in your employer’s 401(k) plan sooner, giving you more time to save for retirement.

Retirement savings lost and found. The Department of Labor will create a national online searchable database to help you find lost retirement accounts. This can be particularly useful if you’ve changed jobs multiple times and lost track of your retirement savings.

Automatic portability. This provision makes it easier to transfer your retirement savings from one employer’s plan to another when you change jobs. It helps ensure that your retirement savings stay with you, no matter where you work.

The bottom line

The provisions in SECURE 2.0 create several opportunities to enhance your retirement readiness. Here’s what you can do:

Take advantage of automatic enrollment and auto-escalation. If your new employer offers these features, they can help you save more effortlessly.
Maximize catch-up contributions. If you’re eligible, make sure to take full advantage of the higher limits to boost your retirement savings.
Participate in your employer’s plan. Whether you’re a full-time or part-time worker, contributing to your employer’s retirement plan can significantly impact your future financial security.
Keep track of your retirement accounts. Use the new lost-and-found database to ensure you don’t lose track of your savings.
Transfer your savings when you change jobs. Make use of automatic portability to keep your retirement savings intact.

Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Franklin Templeton, its affiliated companies, and its employees are not in the business of providing tax or legal advice to taxpayers. Taxpayers should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mike Dullaghan is Director of Retirement Sales Execution for Franklin Templeton, joining via the Putnam integration in 2024. He is responsible for promoting new content, providing thought leadership and delivering the tools and resources that enable the Retirement team to effectively sell Franklin products. Mike collaborates and coordinates across multiple business lines, including US Marketing, Distribution Enablement, Public Market Investments, Distribution Intelligence and Retirement. Previously at Putnam, he was the Director of Content and Sales Enablement for Putnam’s DCIO Team.