3 Big Retirement Rule Changes Are Coming in 2025—How They Could Affect Your Savings | Global News Avenue

The new year brings new rules for retirement savings.

On January 1, some new provisions of the federal retirement law Secure 2.0 will take effect. These new rules can help you save more for retirement or force you to start withdrawing funds.

Here’s how they will impact your retirement savings and legacy.

Older workers can contribute more to retirement plans

Some older workers may qualify for larger earnings catch up contribution Thanks to new Secure 2.0 provisions, they can take advantage of workplace retirement plans like 401(k) and 403(b),

Workers aged 60, 61, 62 or 63 will be able to make catch-up contributions Up to $11,250 By 2025, all other workers age 50 and older will earn $7,500.

Michael Griffin, chief financial officer at Henssler Financial, suggested older workers who still want to save and have extra income to invest could take advantage of the new rules.

“If you have the ability to save more money, we certainly recommend that you do so,” Griffin said. “If you already have a lot of money in your retirement account, maybe additional catch-up contributions won’t do you much good.”

Employers must automatically enroll workers in retirement plans

The new rules also require 401(k) and 403(b) plans Automatic registration workers unless they choose to opt out.

Workers must register at an initial rate of 3% to 10%. Thereafter, the savings rate increases by one percentage point each year until it reaches at least 10%, subject to a cap of 15%.

“We do have a savings problem in the United States, where younger workers are reluctant to contribute to retirement accounts,” Griffin said. “You (might) start saving at 3 percent and look at this (account) in five years.” ” and said, ‘Wow, this taught me a lot. ‘”

While the policy is intended to encourage people to save for retirement, some research from Vanguard suggests that automatic enrollment and increases may not allow those Change jobs often And don’t stay long enough to experience the benefits of an increased savings rate.

Inherited an IRA? You need to get the minimum distribution you need

In the past, people who inherited an IRA from a parent or grandparent could let the investments in the account grow over time, defer taxes and take distributions as they chose. The SECURE Act eliminates these “Extend an IRA”, requiring people to make distributions within 10 years.

“If someone receives money from a parent, or indeed from anyone other than a spouse, then these new rules come into effect,” said Brett Koeppel, CFP and founder of Eudaimonia Wealth. However, a spouse who inherits an IRA can still take advantage of a “Flexible IRA.”

The rule only applies to people who inherit an IRA from someone who died in 2020 or later. The IRS recently clarified how these distributions are made.

Rob Williams, managing director of financial planning at Charles Schwab, explains that starting in 2025, non-spousal beneficiaries of inherited IRAs must take distributions from their accounts each year until the end of the 10-year period, at which time the account must be completely wiped out.

If someone fails to take a distribution from their inherited IRA by the deadline, they could face penalties of up to 25% of the undistributed amount.