New RMD Rules Give Retirement Savings More Time to Grow

Posted on 9-18-2023

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing  the rules for required minimum distribution from tax-deferred retirement accounts with an emphasis on the new provisions of the SECURE 2.0 Act:

The SECURE 2.0 Act, included in the federal spending bill passed in late 2022, dramatically changed the landscape for required minimum distributions (RMDs) from tax-deferred retirement accounts. As part of the effort to strengthen the nation’s retirement system, the Act increased the age to begin RMDs, providing the option to leave retirement savings untapped for a longer period of time.

The legislation also eliminated the requirement to take lifetime RMDs from Roth accounts in employer plans.

Can’t Stay Tax-Free Forever

Contributions to tax-deferred retirement accounts are either made with pre-tax dollars, typically through a payroll deduction, or are tax deductible (up to the annual limit) if made directly. These accounts include traditional IRAs, SIMPLE IRAs, SEP IRAs, SARSEPs, and 401(k), 403(b), and government 457(b) plans.

Unfortunately, you cannot defer taxes indefinitely on the money you’ve accumulated in these accounts. The IRS requires that you take minimum distributions each year once you reach a certain age, whether you need the money or not. The RMD is the smallest amount you must withdraw each year, but you can always take more.

The SECURE 2.0 Act raised the RMD starting age to 73 beginning in 2023, and to 75 beginning in 2033. So you must begin taking annual RMDs at age 73 if you were born from 1951 to 1959, or at age 75 if you were born in 1960 or later. If you were born in 1950 or earlier, you are already required to take RMDs.

Because Roth contributions are made with after-tax dollars, Roth IRA owners are not required to take lifetime RMDs (Beneficiaries have different rules.) SECURE 2.0 extended this treatment to Roth accounts in employer-sponsored plans, effective for tax year 2024 and later.

If you are still employed, you may be able to delay taking RMDs from your current employer’s plan until…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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