What Are RMD Rules for 2023?
The SECURE 2.0 Act, signed into law in December 2022, modifies required minimum distribution (RMD) regulations for retirement account holders beginning in 2023.
Key Changes to RMD Age Requirements
Previously, individuals had to commence RMDs at age 72 from traditional IRAs and 401(k) accounts. The new legislation implements a phased increase:
- 2023: RMD age rises to 73
- 2033: RMD age rises to 75
For those born between 1951-1959, distributions must begin after turning 73. Those born after 1960 can delay until after age 75.
Important Deadlines
First-time RMD withdrawals offer flexibility – you may take them by December 31, 2024, or delay until April 1, 2025. However, delaying into 2025 means taking two distributions in a single tax year, potentially increasing your tax burden that year.
Subsequent annual RMDs must occur within each calendar year.
Tax Implications
RMDs are taxable income. Delaying withdrawals offers potential advantages: retirement savings grow tax-free longer, and lower reported income may reduce Medicare premium costs, which are income-dependent.
The trade-off: larger distributions later in retirement could result in higher tax bills.
Penalty Changes
The SECURE 2.0 Act reduced non-compliance penalties from 50% to 25% of the required amount not withdrawn. Correcting mistakes promptly can reduce penalties to 10% if documented as unintentional errors.
Qualified Charitable Distributions
Account holders aged 70.5 and older may now donate up to $100,000 annually from IRAs to charities without incurring income tax, potentially satisfying annual RMD requirements. This limit adjusts annually for inflation.
A one-time $50,000 contribution to charitable vehicles (gift annuities, trusts) is also permitted.
Roth Account Changes
Roth 401(k) owners no longer face RMD requirements, aligning them with Roth IRA treatment.
If you or a loved one needs assistance with elder law, probate or estate planning issues, do not hesitate to contact us to schedule a consultation. We are here to help.
