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Both the SECURE 1.0 Act of 2019 and the SECURE 2.0 Act of 2022 introduced several changes that affect Required Minimum Distributions (RMDs). Many of these changes provide participants with more time to build up their retirement savings before they have to start dipping into them.
The penalty for failing to take an RMD has been reduced. Previously, if a participant forgot or was unable to take their RMD on time, there was a penalty of 50% of the RMD amount. Beginning with tax years after December 29, 2022, that penalty has been reduced to 25%, and in some cases may be as low as 10% if corrected timely. This provision benefits participants who haven’t taken their RMD on time.
The age participants need to take an RMD has increased. Beginning January 2023, the age requirement for participants to begin taking RMD increased from age 72 to 73. The age requirement will increase to 75 beginning in 2033. The chart below provides the age at which you must begin receiving RMDs.
- If you were born before July 1, 1949 – Your RMD Starting Age is 70 ½
- Born between July 1, 1949 and December 31, 1950 – Your RMD Starting Age is 72
- Born between January 1, 1951 and December 31, 1959 – Your RMD Starting Age is 73
- Born on or after January 1, 1960 – Your RMD Starting Age is 75
Roth accounts within retirement plans will be excluded from RMD amounts. Prior to the SECURE 2.0 Act, participants who wanted to avoid RMD rules would have to roll their assets to a Roth IRA. Now, beginning with taxable years after December 31, 2023, Roth amounts in qualified retirement plans will no longer be subject to the RMD rules during participants’ lifetimes.