If you expected to start your Required Minimum Distributions (RMDs) in 2023, you may not
have to after all.
Since 2020, Traditional Individual Retirement Accounts (IRAs) or Traditional 401(k)s have had
RMDs applied when an account owner reaches age 72. Now, the SECURE Act 2.0, passed December 29,
2022, has changed things. The age when RMDs applies is now 73. The practical impact of the new law
means that anyone not subject to RMDs before January 01, 2023 will not be subject to them until 2024.
Stated differently, those born in 1950 or before, were subject to RMDs in 2022. Those born in
1951 or later will be subject to RMDs starting whenever they turn 73 which will be 2024, at the earliest.
To make things more complex, the effective age is slated to change again in 2033.
Historically, the penalty for missing an RMD was a steep 50% of the amount that should have
been withdrawn. SECURE 2.0 has reduced that penalty to only 25%, and perhaps as low as only 10% if
corrected in a timely manner.
Finally, in concert with this Act, the IRS is continuing to refine it’s stance on RMDs for Beneficiary
(also known as Inherited) IRAs. Last newsletter, this column outline how such IRAs were now required
to be emptied within 10 years of death which could trigger substantial tax consequence for
beneficiaries. Now it appears the IRS may require RMDs for some Beneficiary IRAs during that 10 year
period, further complicating the inheritance and estate planning process.
This Act changes rules that were put in place less than three years ago and contains new rules
that are schedule to phase in over the next 10 years. At Verus, we work hard to stay informed on such
rules and work with our clients to navigate the ever changing landscape of legacy planning. If you or
anyone you know needs help making sense of these new regulations, please give us a call!