SECURE 2.0 Act Changes RMD Rules (2024)

FAQs

What are the RMD changes for 2024? ›

Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.

The SECURE 2.0 Act increases the RMD age from age 72 to age 73 in 2023, and then to age 75 in 2033* (or the year of retirement, if later, for certain plan participants who are not 5 percent owners).

New for 2023: The Secure 2.0 Act raised the age that account owners must begin taking RMDs. For 2023, the age at which account owners must start taking required minimum distributions goes up from age 72 to age 73, so individuals born in 1951 must receive their first required minimum distribution by April 1, 2025.

How RMDs are calculated. To calculate your required minimum distribution for the current year, you divide your account balance at the end of the last year by your life expectancy. The IRS provides tables that show you which life expectancy numbers to use based on your age and if you are sharing your RMD with a spouse.

Final regulations anticipated for 2025

The regulations will incorporate SECURE 1.0 changes to the RMD rules, including an increase in the RMD beginning age from 70-1/2 to 72 and the new 10-year rule. The regulation will also include some later changes made by the SECURE 2.0 Act of 2022 (Div. T of Pub.

This means some beneficiaries of inherited IRAs have had more time to adapt to distribution requirements. The IRS will waive penalties for RMDs missed in 2024 from IRAs inherited in 2023, where the deceased owner was already subject to RMDs.

What changed under SECURE 2.0? The SECURE Act eliminates the stretch IRA option and now requires most non-spouse beneficiaries to take RMDs ratably from accounts inherited from owners who died after 2019 within 10 years after the account owner's death.

At what age do RMDs stop? Simply put, they don't! Once you start taking RMDs, there is no stopping age. You must continue making withdrawals each year, even if you don't need the income.

The penalty for failing to take a required minimum distribution is steep – historically, a 50% excise tax on the amount by which you fell short of the required distribution amount. The SECURE Act 2.0 reduces the RMD tax penalty to 25% of the shortfall, effective this year.

SECURE 2.0 generally requires that a 401(k) or 403(b) plan established after December 29, 2022 must automatically enroll employees—beginning the first plan year beginning after December 31, 2024—at a rate of no less than 3% and no more than 10% and automatically escalate employees by an additional 1% per year up to a ...

What is the 10 RMD rule? ›

Specifically, Treasury and IRS reviewed comments suggesting that a beneficiary of an individual who has started required annual distributions should not be required to continue those annual distributions if the remaining account balance is fully distributed within 10 years of the individual's death as required by the ...

De minimis financial incentives

The SECURE 2.0 Act made changes designed to encourage employees to contribute to their employers' 401(k) or 403(b) plans. These changes allow employers to offer small financial incentives to employees who choose to participate in these retirement savings arrangements.

For investors who plan to use their RMDs as a source of retirement income, a monthly payment may be a good choice. Keep in mind that while you'll pay the same amount of income tax no matter when you receive the money, delaying your RMD until year-end gives your money more time to grow tax-deferred.

Say your IRA was worth $500,000 at the end of 2023, and you were taking your first RMD at age 73 this year. Your distribution amount would be $18,868 ($500,000 divided by 26.5). Likewise, if you were turning 85 in 2024, your RMD would be $31,250 ($500,000 divided by 16).

If you're at least age 59½ and your Roth IRA has been open for at least five years, you can withdraw money tax- and penalty-free.

The limit on annual contributions to an IRA increased to $7,000 in 2024, up from $6,500. Catch-up contributions for taxpayers over 50 are available, but these limits remain unchanged for 2024 at $1,000 ($8,000 total). The income thresholds to be eligible for a Roth IRA are also higher in 2024.

New rules make it easier to tap your retirement account for emergency funds. In 2024, you can cash out as much as $1,000 from a traditional 401(k) or IRA to cover an urgent need. And here's a big change: You get to define what counts as an emergency. More Americans are raiding retirement accounts for emergency cash.

The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.