Required minimum distributions (RMDs) are the minimum amount of money you must withdraw from your traditional IRAs and 401(k)s each year after you reach a certain age. The SECURE 2.0 Act, which was signed into law in December 2022, made several changes to RMDs, including:
Raising the age to start RMDs. Before the SECURE 2.0 Act, the age to start RMDs was 72. The new law increases the RMD age to 73 beginning in 2023 and to 75 beginning in 2033. That means if you were born between 1951 and 1959, you'll need to start these withdrawals after you turn 73. But if you were born in 1960 or later, you get to hold off on these withdrawals until after you hit 75. This change offers more flexibility on when you need to start dipping into those savings.
No more RMDs from Roth accounts in employer retirement plans. Starting in 2024, RMDs will no longer be required from Roth accounts in employer retirement plans. This means you can keep your money in your Roth account and continue tax-free growth until you withdraw it.
Here is a table summarizing the RMD age changes under the SECURE 2.0 Act:
Year | RMD Age |
2022 and earlier | 72 |
2023 | 73 |
2024-2032 | 73 |
2033 and later | 75 |
What does this mean for you?
If you are already taking RMDs, you will not be affected by the SECURE 2.0 Act. However, if you are approaching the RMD age, you may be able to delay taking RMDs for a few years. This can give your investments more time to grow tax-deferred.
If you have a Roth account in an employer retirement plan, you will no longer be required to take RMDs from that account starting in 2024. This gives you more flexibility in your retirement plan and potentially more tax-smart income from your retirement savings.
It is important to note that the SECURE 2.0 Act is complex, and there are many other changes that can affect your retirement savings. It is always a good idea to consult a financial advisor to discuss your situation.
Here are some additional things to keep in mind about RMDs:
RMDs are calculated based on your account balance and a life expectancy table.
You can withdraw more than your RMD each year, but you will have to pay taxes on the excess amount.
If you fail to take your RMD, you will be penalized 50% of the amount that should have been withdrawn.
If you have any questions about RMDs, be sure to talk to your financial advisor, or feel welcome to contact us.
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The content provided in this blog post is for informational purposes only and should not be construed as legal, tax, or investment advice. Any discussions related to investments or securities are not intended as personalized recommendations. Readers are encouraged to seek professional legal, tax, and financial guidance tailored to their specific circumstances before making any investment decisions. The views expressed in this post are solely those of the author and do not represent the opinions of any specific financial institution or investment firm.