Dollars & Sense: Secure Act 2.0 Changes RMD Age

The Secure Act 2.0 changes the age IRA owners must start taking required minimum distributions, or RMDs. There is no change for those already taking RMDs. If you are already required to take RMDs, you must continue to take them. Obviously, many retired Americans take withdrawals from their IRAs because they need the income to live on. But for those who delay withdrawals until the IRS says they have to, those ages have changed.

The Secure Act 1.0 changed the RMD age from 70-1/2 to 72 for anyone who turned age 70-1/2 after Dec. 31, 2019. Secure Act 2.0 delays RMDs for those who turn age 72 after Dec. 31, 2022, and turn 73 before Jan. 1, 2033, the first RMD age is 73. For anyone who turns 74 after Dec. 31, 2032 (born on or after Jan. 1, 1959), the first RMD age is 75.

An unusual effect of Secure Act 2.0 is that there will be no IRA owner who has their first RMD year in 2023. The first year that RMD distributions must begin for those impacted by the new law is 2024.

A mistake was made in this legislation. Those born in 1959 will have two first-year RMD years.

Secure Act 2.0 does not make changes to those who continue to work who can defer withdrawals from their 401(k) (and other plans) as long as they continue to work, the “Still Working” exception. This exception is for plan participants who do not own more than 5% of the business sponsoring the plan. Most plans allow the “Still Working” exception, although optional.

Highlights of Secure Act 2.0:

* Secure Act 2.0 raises the first RMD age to 73 in 2023, then age 75 in 2033.

* The “Still Working” exception remains to defer RMDs for those still working and having 401(k) and other plans.

* Delayed RMD presents more opportunity for Roth conversions.

* QCDs for charity are still available at age 70-1/2.

* There will be a lot of confusion with the different required beginning dates.

The Secure Act 2.0 changes to RMDs are fairly minor. The RMD is pushed back one year, and the delay to age 75 doesn’t happen until 2033. Call Chris Robinson with RFG Wealth Advisory in Argyle at 940-464-4104 if you have questions about Secure Act 2.0 and how it may affect you!

Investment advice is offered through RFG Wealth Advisory, a registered investment advisor and separate entity from LPL Financial.