As you might already know, the SECURE Act made a number of changes to retirement account rules. Specifically, the age at which required minimum distributions (RMDs) must begin was raised from 70 ½ to 72, giving retirees a bit more time to leave money in their accounts. Now, the SECURE 2.0 Act has again bumped up that minimum age to 73. How that affects you will depend on a few factors unique to your situation.
For those who already began their distributions, or were planning to do so before age 73, there will be no change. But if you were wishing you could delay your first distribution, you can now leave that money in the account for another year. This benefits you in two ways: First, the money could potentially continue to grow. Second, because none of us know how long we will live in retirement, we want to take as few distributions as possible to ensure that our income lasts.
If you’re not looking at retirement for a while longer, you might be interested to know about another change made by the SECURE 2.0 Act: In 2033, the age at which RMDs must begin will climb to 75. Keep this in mind if you’re planning for retirement in the next decade or so.
The Act also changed the penalties imposed upon those who take late distributions. It will now drop from 50 percent of the amount you should have taken, to 25 percent. And if you take the right steps to remedy your mistake, you can apply to have the penalty dropped to just 10 percent.
But that doesn’t mean you should overlook this important retirement planning step. Ten percent of your RMD is still a significant amount of money, and there’s no reason to give away that much if advance planning can prevent a mistake.
As age 73 approaches, make sure to meet with us regularly to plan your first RMD. We can help you calculate it correctly and avoid any potential costly mistakes, along with helping you budget your new retirement income.