If you are employed at Kroger, it is imperative to account for changes in legislation, the economy, and markets to make more informed financial decisions. Amid the 1,650-page $1.7 trillion omnibus spending legislation passed by Congress were several provisions affecting work-sponsored retirement plans and IRAs. Dubbed the SECURE 2.0 Act of 2022, the legislation is designed to improve the current and future state of retiree income in the United States.
'This important legislation will enhance the retirement security of tens of millions of American workers — and for many of them, give them the opportunity for the first time to begin saving,' said Brian Graff CEO of the American Retirement Association.
What Does the Legislation Do?
If you work for Kroger, understanding the impacts of legislation is essential when conducting financial planning. The following is a brief summary of some of the most notable initiatives. All provisions take effect in 2024 unless otherwise noted.
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Later age for required minimum distributions (RMDs)
. The 2019 SECURE Act raised the age at which retirement savers must begin taking distributions from their traditional IRAs and most work-based retirement savings plans to 72. SECURE 2.0 raises that age again to 73 beginning in 2023 and 75 in 2033. For Kroger employees, understanding the change in age for RMDs may help you plan according to these regulations, and avoid forgetting about taking these required distributions.
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Reduction in the RMD excise tax
. Kroger employees should also be aware that current law requires those who fail to take their full RMD by the deadline to pay a tax of 50% of the amount not taken. The new law reduces that tax amount to 25% in 2023; the tax is further reduced to 10% if account holders take the full required amount and report the tax by the end of the second year after it was due and before the IRS demands payment.
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No RMDs from Roth 401(k) accounts
. Bringing Roth 401(k)s and similar employer plans in line with Roth IRAs eliminates the legislative requirement for savers to take minimum distributions from their work-based plan Roth accounts.
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Higher limits and looser restrictions on qualified charitable distributions from IRAs
. The amount currently eligible for a qualified charitable distribution from an IRA ($100,000) will be indexed for inflation. In addition, beginning in 2023, investors will be able to make a one-time charitable distribution of up to $50,000 from an IRA to a charitable remainder annuity trust, charitable remainder unitrust, or charitable gift annuity.
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These provisions represent just a sampling of the many changes that will be brought about by SECURE 2.0. We look forward to providing more details and in-depth analysis applying to both individuals and business owners in the weeks to come.
Sources: The Wall Street Journal, CNBC, Bloomberg, Kiplinger, Fortune, Plan Sponsor magazine, National Association of Plan Advisors, and the SECURE 2.0 Act of 2022
1 Bear in mind that not all charitable organizations are able to use all possible gifts. It is prudent to check first. The type of organization you select can also affect the tax benefits you receive.
2 As with other investments, there are generally fees and expenses associated with participation in a 529 savings plan. There is also the risk that the investments may lose money or not perform well enough to cover college costs as anticipated. Investment earnings accumulate on a tax-deferred basis, and withdrawals are tax-free as long as they are used for qualified education expenses. For withdrawals not used for qualified education expenses, earnings may be subject to taxation as ordinary income and possibly a 10% tax penalty. The tax implications of a 529 savings plan should be discussed with your legal and/or tax professionals because they can vary significantly from state to state. Also be aware that most states offer their own 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers. These other state benefits may include financial aid, scholarship funds, and protection from creditors. Before investing in a 529 savings plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses - which contain this and other information about the investment options, underlying investments, and investment company - can be obtained by contacting your financial professional. You should read these materials carefully before investing.