The original “Setting Every Community Up for Retirement Enhancement” Act, also known as the SECURE Act, became effective on January 1, 2020. The SECURE Act 2.0 was passed into law in 2022 and has changes that go into effect at different times. Some of the changes went into effect in 2023. Others in 2024 or later years will affect retirement savings plans such as 401(k), 403(b), and IRAs.
The TSP has a dedicated web page focused on summaries of those changes, their effective dates, and which participants they affect at SECURE 2.0 and the TSP.
Among these are enhanced withdrawal opportunities for:
- Domestic abuse survivors
- Those with terminal illness
- Qualified disaster recovery withdrawals
- Qualified long-term care premiums
Starting in 2024, the SECURE Act 2.0 also allows withdrawing up to $1,000 from a retirement account for “an unforeseeable or immediate financial need for an individual or family.”
Usually taking a distribution from an IRA or retirement plan for anything other than retirement should be avoided. If you withdraw money from a 401 (k) or the TSP before the age of 59 ½, the IRS usually assesses a 10% tax as an early distribution penalty. You would still have to pay ordinary income tax on the money.
TSP eventually will provide complete guidance for all the provisions of SECURE Act 2.0. You may also want to consider subscribing to future TSP Bulletins and continue to stay informed by monitoring FedSmith for announcements and updates.
If you are curious about how the SECURE Act 2.0 may affect you and your family, consider this article by Melani Waddle. In Ed Slott: Pay Attention! SECURE 2.0 Dates Are ‘All Over the Place’, she gives an overview of the changes to retirement plans and IRAs that went into effect in 2023 and 2024.
For those who would like a cheat sheet that gives an overview of SECURE Act 2.0 changes beyond 2024, T. Rowe Price has anticipated your wish: SECURE 2.0 Act: Cheat Sheet (troweprice.com).
Will there be a SECURE Act 3.0? Stay tuned.
