SECURE 2.0 – a new era for retirement planning

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In today’s economic climate, retirement planning has never been more critical. Americans are living longer, healthcare costs continue to rise, and traditional pensions have largely disappeared from the private sector. Yet, despite these realities, many individuals are woefully underprepared for retirement.

According to a 2023 study by Northwestern Mutual, the average U.S. retirement savings balance in a 401(k) plan is $118,701, but the median is only $32,689—a stark indicator that many Americans are falling short of what they’ll need to retire comfortably¹.

Compounding the issue, 20% of Americans aged 50 and older have no retirement savings at all, and 61% worry they won’t have enough to support themselves in retirement². Meanwhile, the average monthly Social Security benefit in 2025 is just $1,976, which amounts to less than $24,000 annually³. For most retirees, that’s not nearly enough to cover basic living expenses, let alone healthcare, travel, or legacy planning.

This growing gap between what people have saved and what they’ll need underscores the importance of proactive, strategic retirement planning. That’s where the SECURE 2.0 Act comes in. Enacted as part of the Consolidated Appropriations Act of 2022, this legislation introduces sweeping changes designed to help Americans save more, save earlier, and save smarter. Whether you’re a business owner seeking to enhance your retirement plan offerings or a high-net-worth individual looking to optimize your tax strategy or a, SECURE 2.0 presents a host of new opportunities—and a few new responsibilities. Let’s explore what this means for you.

Provisions tailored to small and mid-sized businesses

For business owners, SECURE 2.0 introduces several incentives and requirements that could reshape how retirement benefits are offered and administered.

Local businesses here in Rochester have a timely opportunity to take advantage of these new incentives to reduce costs, improve plan efficiency, and strengthen their overall benefits strategy. Small business owners should start by reviewing their current plan providers, payroll systems, and benefit advisors to ensure they’re prepared for these changes. By planning ahead, Rochester businesses can turn regulatory changes into strategic advantages that support growth and financial stability.

One of the most impactful changes is the enhanced startup tax credit for small businesses establishing new retirement plans. Employers with 50 or fewer employees can now receive a credit covering 100% of administrative costs, up to $5,000 per year for three years. Additionally, there’s a new credit of up to $1,000 per employee for employer contributions, phased out for businesses with 51–100 employees. These credits significantly reduce the cost of launching a plan and make it easier for small businesses to compete for talent.

Another major shift is the mandatory automatic enrollment requirement for new 401(k) and 403(b) plans established after December 29, 2022. Beginning in 2025, these plans must automatically enroll eligible employees at a rate of 3% to 10%, increasing annually up to 15%, unless the employee opts out. While this requirement doesn’t apply to businesses with 10 or fewer employees or those in operation for less than three years, it reflects a broader push toward increasing retirement participation.

Employers also now have the option to offer Roth treatment for matching and nonelective contributions. While this requires plan amendments and may involve additional administrative complexity, it provides employees with the opportunity to receive employer contributions in a Roth account—an attractive feature for younger, high-earning employees who value tax-free growth.

These changes underscore the importance of reviewing your company’s retirement plan design and administration. Employers should work closely with their plan providers, payroll teams, and tax advisors to ensure compliance and to take full advantage of the new incentives.

Opportunities for high-net-worth individuals

One of the most significant changes for high earners is the shift in how catch-up contributions are treated. A catch-up contribution is an extra amount that people age 50 or older can add to their retirement accounts—like 401(k)s or IRAs—on top of the regular annual limit. They’re designed to help those nearing retirement boost their savings if they need to make up for lost time. However, the SECURE 2.0 Act changes how catch-up contributions will work for high earners

Beginning in 2026, individuals aged 50 and older who earn more than $145,000 annually (indexed for inflation) will be required to make their catch-up contributions to Roth accounts rather than traditional pre-tax accounts. While this eliminates the immediate tax deduction, it allows for tax-free growth and withdrawals in retirement—an appealing trade-off for those expecting to remain in a high tax bracket.

Additionally, individuals aged 60 to 63 will soon be able to make enhanced catch-up contributions starting in 2025. These contributions can be the greater of $10,000 or 150% of the standard catch-up limit, offering a powerful tool for late-career professionals looking to boost their retirement savings.

Another provision with long-term planning implications is the increase in the Required Minimum Distribution (RMD) age. The age has already risen to 73 in 2023 and will increase again to 75 by 2033. This change gives retirees more time to grow their savings tax-deferred and opens the door for strategic Roth conversions during lower-income years between retirement and RMD age.

Finally, a creative new option allows for 529 plan rollovers to Roth IRAs. Starting in 2024, up to $35,000 of unused 529 funds can be transferred to a Roth IRA for the beneficiary, subject to annual contribution limits and other conditions. This offers a tax-efficient way to repurpose education savings and jumpstart retirement savings for children or grandchildren.

Looking ahead

The SECURE 2.0 Act is more than just a legislative update—it’s a strategic opportunity. For business owners, it provides tools to enhance employee benefits, reduce administrative costs, and foster a culture of financial wellness. For high-net-worth individuals, it offers new ways to optimize tax efficiency and retirement readiness.

As with any major policy shift, the key is proactive planning. Work with your CPA, financial advisor, and retirement plan provider to assess how these changes affect your personal and business goals. The road to a more secure retirement just got a little smoother—and a lot more flexible.

Anthony R. Scinto, CPA, is a Tax Partner and Chair of the Tax Department at Mengel Metzger Barr & Co.

1. Forbes Advisor survey showing the median retirement savings is $32,689 and average is $118,701. Source: https://www.forbes.com/advisor/banking/savings/average-american-savings/
2. AARP survey stating 20% of Americans aged 50+ have no retirement savings and 61% worry about retirement adequacy. Source: https://press.aarp.org/2024-4-24-New-AARP-Survey-1-in-5-Americans-Ages-50-Have-No-Retirement-Savings
3. Social Security average monthly benefit in 2025 is $1,976. Source: Assumed from SSA.