A 60-second read by the Baron Team: Congress passed new laws in the SECURE 2.0 Act of 2022, changing the age requirements for taking Required Minimum Distributions (RMDs) from retirement accounts, as well as increasing the catch-up contribution levels.
In 2023: As of January 1, 2023, individuals must begin taking required minimum distributions (RMDs) from their retirement account at age 73, replacing the previous age requirement of 72. Please note that if you were required to start taking RMDs in 2022, and you delayed doing so until this year, you must still take your 2022 RMD by April 1, 2023.
In 2033: The RMD age will increase to age 75.
In 2024: The individual retirement account (IRA) catch-up contribution limit would be tied to inflation, starting in 2024. It will rise annually to keep pace with inflation.
In 2025: Congress also increased the catch-up contributions for individuals ages 60 through 63, starting in 2025. Individuals who qualify could contribute an additional 50% of the regular catch-up contribution limit, which begins at age 50.
Keep in mind:
- In 2023: The penalty for not taking one’s Required Minimum Distribution (RMD) from an IRA, was previously 50% of the amount that was not distributed. Under the new Secure Act 2.0, in 2023, the penalty is now reduced to 25% and 10% if corrected in a timely manner, by withdrawing the necessary RMD by December 31, 2024.
- There are instances where the IRS can waive the penalty. A form must be filed with the IRS, which we recommend an accountant review before filing.
- We recommend always taking your RMD, as the IRS also requires your custodian to report your accounts that are subject to RMDs.
- If one has multiple IRAs, the RMD can be taken from any account.
- If the money is not needed, the RMD can be placed in a taxable account to be invested.
As always, please reach out to your tax-planning professional for advice for your specific tax situation.
For any questions, please contact your Baron Team.
Disclosure: This is a general communication being provided for informational purposes only. This material is not intended to be relied upon as a forecast, research, legal, tax or investment advice. Please consult your financial planning and tax professionals for personal advice.