The SECURE 2.0 Act of 2022 introduced sweeping changes to the retirement landscape. Among the most impactful: starting in 2025, new 401(k) and 403(b) plans must automatically enroll eligible employees at a minimum contribution rate of 3%, with annual 1% increases up to at least 10%. For workers nearing retirement, these changes create both opportunities and planning considerations that deserve careful attention.
What Auto-Enrollment Actually Changes
Previously, employees had to actively opt into their employer's retirement plan. Many never did — especially lower-income workers and younger employees. Auto-enrollment flips the default: you're in unless you choose to opt out.
The 3% Starting Rate
New plans must start employees at a minimum 3% deferral rate. This is a floor, not a ceiling — employers can set higher defaults.
Annual Auto-Escalation
Contributions automatically increase by 1% each year until reaching at least 10% (and up to 15% at the employer's discretion). This “set it and forget it” approach leverages behavioral inertia to help workers save more over time.
Who's Exempt
Existing plans established before December 29, 2022 are grandfathered. Small businesses with 10 or fewer employees, businesses less than 3 years old, church plans, and government plans are also exempt.
The Roth Catch-Up Mandate
SECURE 2.0 also mandates that catch-up contributions for high earners (those making over $145,000) must go into Roth accounts starting in 2026. This is a significant shift for pre-retirees who have been making pre-tax catch-up contributions.
Planning Implication
If you're over 50 and earning more than $145,000, your catch-up contributions will no longer reduce your current taxable income. However, they'll grow tax-free in a Roth account — which may actually be more beneficial if you expect to be in a similar or higher bracket in retirement.
IRMAA Interactions to Watch
For retirees already on Medicare, the shift toward Roth catch-up contributions has an indirect benefit: Roth distributions don't count toward Modified Adjusted Gross Income (MAGI), which determines your IRMAA surcharges.
The Long Game
Building a larger Roth balance now — even through mandatory Roth catch-up contributions — means more tax-free income in retirement that won't trigger IRMAA surcharges, won't increase Social Security taxation, and won't create Required Minimum Distributions.
Student Loan Matching: A Benefit for Your Children
One of the lesser-known SECURE 2.0 provisions allows employers to make matching contributions to an employee's retirement plan based on their student loan payments. This means your adult children who are paying off student loans can still receive employer retirement matches — even if they can't afford to contribute to their 401(k) directly.
Why This Matters for Your Family
If your children are burdened by student debt and not contributing to retirement plans, this provision could help them start building retirement savings earlier. Earlier savings means more compounding time — and potentially less financial support needed from you in the future.
What Pre-Retirees Should Do Now
Review your current catch-up strategy
If you're a high earner over 50, prepare for mandatory Roth catch-up contributions starting 2026. Adjust your tax planning accordingly.
Coordinate with your Roth conversion strategy
Mandatory Roth catch-ups and voluntary Roth conversions should be planned together to manage your overall tax bracket.
Talk to your adult children about student loan matching
If their employer offers this benefit, they could be building retirement savings without any additional out-of-pocket cost.
The Bottom Line
SECURE 2.0 is reshaping how Americans save for retirement. For pre-retirees, the most actionable changes are the Roth catch-up mandate and the broader shift toward Roth savings. These changes reinforce what we've been advising for years: building tax-free income sources now pays dividends for decades.
How Does SECURE 2.0 Affect Your Plan?
Every provision interacts differently with your specific tax situation, retirement timeline, and income sources. Schedule a free Discovery Session and we'll show you exactly how these changes impact your strategy.
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