The original SECURE Act of 2019 extended the age from 70 ½ to 72 where you are required to take Required Minimum Distributions (RMDs) from your IRA accounts.

Now with the passing of the Omnibus Bill, SECURE Act 2.0 extends Required Minimum Distributions (RMDs) beginning date to age 73, starting in 2023.

If you are nearing retirement, you need to stay up to date on these changes, and how they may affect your retirement portfolio. Pay attention to the details including how the penalties for not taking withdrawals on time will affect you…

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With the passage of SECURE Act 2.0, Required Minimum Distributions (RMDs) are phased in over the next 10 years. Here’s the breakdown of when you need to take RMDs:

In phase #1: RMDs will now start at age 73, starting in 2023. If you have already started RMDs, this will not change for you.

If you turn 72 in 2023, you can take your first RMD by December 31st, 2024, or you could delay it to April 1st of 2025. If you delay to April, you will need to take 2 RMDs in 2025. One for 2024, and one for 2025.
In phase #2: Starting in 2033, the RMDs move up to 75.

Also included in the bill are massive changes to the original 50% penalty for not taking Required Minimum Distributions (RMDs) on time:

The hefty 50% penalty for not taking RMDs will drop to 25% in 2023.
The penalty drops to 10% if you take the required amount by the end of the second year that it was due. For example: If your RMDs for 2023 aren’t taken, you have till December 31st of 2025 to take the withdrawal and only pay the 10% penalty.
The penalty could be waived completely if you didn’t take the RMD due to an unforeseen event (like illness), but then withdrew it as soon as you could. You would have to ask the IRS for a penalty waiver.

Roth accounts in workplace plans will be exempt from RMDs starting in 2024.

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The Required Minimum Distribution (RMD) rules are changing for 2023, and it’s essential that retirees and those approaching retirement understand the new regulations. The RMD is the minimum amount of money retirees must withdraw annually from their retirement plans, including traditional IRAs and 401(k)s. Here is what you need to know about the upcoming RMD changes:

Increase in RMD Age

Starting in 2023, the age when RMDs must commence will increase from 72 to 75 years. This change will provide more flexibility to retirees and is in recognition of the increased life expectancy and the fact that many people are working longer. The provision is part of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December 2019.

What Does it Mean for Retirees?

The increase in RMD age means that people who are 72 and younger will not have to take RMDs, which can be beneficial for those who want to keep their retirement savings intact for longer. The change in the rule will allow individuals to let their savings grow without having to withdraw a portion of it each year, ultimately providing more flexibility and control over their finances in retirement.

Impact on Beneficiaries

Another key change of the SECURE Act is the modification of the rules for non-spouse beneficiaries of inherited retirement accounts, including IRAs and 401(k)s. Previously, beneficiaries could take distributions from inherited accounts over their lifetimes. However, under the new law, most beneficiaries will have to withdraw all of the money from the inherited account within ten years of the owner’s death. This change will impact how people plan for their retirement and legacy, making it important to consult with a financial advisor or estate planning attorney.

Conclusion

The new RMD rules set to take effect in 2023 will provide retirees with more flexibility and control over their finances during retirement. The delay in RMD age allows retirees to grow their savings for longer, while the modifications for beneficiaries will impact retirement planning and legacy goals. It’s crucial for individuals to stay informed of the changes to RMD rules and to seek guidance from experienced financial professionals to ensure their retirement goals align with the new regulations.