With the Secure 2.0 Act, retirement saving is about to get easier in 2024. The act became law at the end of last year and consists of valuable provisions. There are some key changes related to retirement that are important for retirement planning in the new year.
One of the first welcome changes is that it allows employers to consider student loan payments as qualifying contributions for retirement-matching programs. Hence, if an employer provides a match to an employee’s 401(k) contributions, and the employee is paying down student loans, then the student loan payments count as retirement contributions to the 401(k).
According to Yahoo Finance, “Your employer’s match does, however, go into a retirement savings account. Provisions from the retirement law make it possible for employers to earn a tax break on that type of match. The precise matching formula and whether the employer offers this depends on the employer.”
Furthermore, the law also offers employees easy emergency access to retirement savings accounts. In early 2023, many people ransacked their retirement accounts to pay for unexpected financial shocks due to high inflation and interest rates.
From 2024, an employee shall be able to pull out $1,000 annually from the retirement account. However, it needs to be an emergency. Here, the employee also does not need to pay the 10% early distribution penalty.
In addition, if the employee agrees to pay back the amount in three years, there might not be a tax bill, either. However, this withdrawal is only applicable for personal or family emergencies.
Apart from that, the law allows domestic victims of less than 59.5 years of age to pull out $10,000 from 401(k) or IRA without even paying the 10% penalty.