What the Wealth Episode 74: SECURE Act 2.0 – New Opportunities for RMDs
The SECURE 2.0 (Securing a Strong Retirement) Act, which was signed into law at the end of 2022, has many moving parts, which we’ll cover in-depth in the future. But I wanted to get this information on RMDs out quickly for those of you nearing or in retirement.
What are RMDs?
RMDs are required minimum distributions, mandatory withdrawals from employer-sponsored retirement accounts, and traditional IRAs. Because these accounts have not been taxed, the IRS wants its tax revenue from them.
The RMD age used to be 701/2. That was increased to 72 a few years ago, and the SECURE Act 2.0 raised the age again. Beginning January 1, 2023, the age to take RMDs increases from 72 to 73. In 2033, the age will increase to 75.
For those born between 1951 and 1959, RMDs begin at 73. This is a positive change. You have an extra year to implement additional planning strategies like QCDs and doing a Roth conversion. Roth IRAs are not subject to RMDs.
For those born in 1960 or later, RMDs begin at age 75. So those people have three extra years, again more good news as it gives additional time to plan. And remember, you can take withdrawals penalty-free after age 591/2. You’ll pay ordinary income tax and state taxes where applicable but won’t pay a penalty.
What about those already taking RMDs? You have to continue to take them.
Everyone is Impacted
While these RMD changes most immediately impact those close to or in retirement, it affects anyone planning for retirement. They give everyone a longer runway for planning.
And for those of you who have parents or grandparents that you help with financial matters, be sure to talk to them about these changes and how they’ll be impacted. These changes were announced late in 2022 when many people were distracted by the holidays, so they may have missed the big news.
If you have questions on RMDs, the SECURE Act 2.0, or any other aspect of financial planning, reach out; we’re here to help.
Listen to the Full Episode:
What You’ll Learn In Today’s Episode:
- What an RMD is and why it was originally put in place.
- The additional planning strategies you can employ instead of RMDs if you are not required to take them yet.
- The value in being able to choose when you take your money.
- What happens if you are already taking RMDs.
Ideas Worth Sharing:
- “This is going to be huge just to get some of those additional Roth conversions done before they’re required to take RMDs.’” – Jonathan Bednar
- “This is good news! It allows for additional planning, it allows you to be more nimble and take the money when you want to take it vs. being forced to take this money.” – Jonathan Bednar
Resources In Today’s Episode:
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