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  • Writer's pictureSteven J. Rosenthal, CPA, CFP, JD

The 3 key things you need to know about: SECURE Act 2.0 RMD.

man signing bank paper

On December 19, 2022, a retirement bill known as SECURE Act 2.0 was signed into law. It was part of the Consolidated Appropriations Act of 2023, the omnibus spending bill that authorized roughly $1.7 trillion in new Federal spending.

Many provisions in SECURE Act 2.0 affect required minimum distributions (RMDs) in both employer and individual retirement plans. The effects of these provisions are generally favorable and provide tax planning opportunities. The key takeaways are the following:

  • The age for taking RMDs from pre-tax retirement accounts has been raised from age 72 to age 73 and will gradually be increased to age 75. The increase provides an enhanced opportunity for retirees to manage the lifetime taxability of their retirement savings by taking distributions during the penalty-free window from age 59½ to ages 73 through 75.

  • Tax penalties for failing to take RMDs have been reduced from 50% to 25%. While this benefits retirees who fail to withdraw RMDs in a timely manner, the penalties are still substantial and cannot always be abated after the fact. The penalties can be avoided with proper planning.

  • Distributions from Roth 401(k) plans are no longer subject to RMD requirements. This brings Roth 401(k) plans in line with Roth IRA plans which do not have RMD requirements. However, 401(k) plan contributors may want to roll over their 401(k) accounts to Roth IRAs to lower administration fees and increase the diversity of their investments.

The law has many other provisions that promote contributing to and accessing funds in retirement accounts and is analyzed by the Senate Finance Committee at the following link.

Please get in touch with Fulcrum Wealth Advisors if you want to discuss managing taxes with RMDs or with any other provisions in SECURE Act 2.0.


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