New RMD Rules From Secure Act 2.0

Sep 13, 2023 | Nearing & In Retirement, Planning Playbook

The SECURE Act created the most significant changes to retirement plans since 2006. This included raising the required minimum distribution age for retirement accounts. How does the SECURE Act affect your retirement income and tax planning?

Hi, I’m Kyle Barclay, Senior Vice President and Wealth Advisor at GreenUp Wealth Management. Let’s chat a little bit about the SECURE Act and how it may impact you. Firstly, SECURE is an acronym for Setting Every Community Up for Retirement Enhancement. This law first passed in 2019 to address the growing retirement challenges in the United States and made several changes to the retirement system.

This included raising the required minimum distribution age for retirement accounts from age 70 ó to age 72. A required minimum distribution, or more commonly referred to as RMD, is the minimum amount of money the IRS requires you to withdraw from your retirement accounts each year. Two years and a day later, after the first iteration of the SECURE Act, the SECURE Act 2.0 was signed into law, increasing the RMD age once again from age 72 to 73 for those born from 1951 through 1959, and to age 75 for those born in 1960 or later.

While the SECURE Act gives many of us the option to wait longer to take money out of our retirement accounts, one big question is, should we? The answer depends on your personal situation. According to the Treasury Department’s estimations, 80 percent of people taking RMDs take more than the minimum amount because they need money from their retirement accounts to help cover living expenses.

Even if you can afford to wait, you may not want to wait. The longer you delay distributions from your retirement accounts, the more time your investments have to grow. Since these distributions are taxable, taking a larger amount out later could push you into a higher tax bracket. This could result in a higher percentage of your Social Security benefits being taxed, and it may increase your Medicare Part B and D premiums, which are based on your income.

A question for you: What if you don’t plan to withdraw most of your retirement assets? The SECURE Act created a new rule requiring most retirement account beneficiaries to withdraw all retirement funds within 10 years of your passing. If you intend to pass your retirement assets on to your heirs, delaying your required minimum distributions may increase their tax bill in the future.

This is where a detailed financial plan can help you and your family, with both retirement income and tax planning. Based on you and your family’s unique situation, retirement account withdrawals can be coordinated with strategies such as Roth IRA conversions, delaying social security benefits, charitable giving, or the sale of a business, property, or other taxable assets that produce significant amounts of capital gains.

It’s really like a big puzzle where each piece needs to be put together in a proper, intentional, and coordinated manner. While it’s nice to have the flexibility that a later required minimum distribution age offers us, it doesn’t necessarily mean you should wait to withdraw your money from your retirement account. Your GreenUp Wealth Advisor will create a customized retirement income strategy to help reduce your taxes over the long run and help get you the most out of your retirement nest egg to enjoy. I’m Kyle Barclay. Thanks for watching.

Author

  • Kyle Barclay, CFP®

    Senior Vice President | Wealth Advisor | Kansas City -- Kyle is a CFP® and has been in the financial services industry advocating for clients helping them reach their financial goals for over a decade. Prior to joining GreenUp Wealth Management in April of 2021, Kyle served clients as a financial advisor at a broker dealer and a registered investment advisor for 10 years. Before working in financial services, Kyle spent 8 years working in management for independent grocery stores across Missouri and Kansas always keeping a customer first mentality. As a leader in the grocery industry, he focused on enhancing each store’s customer experiences by tailoring each store’s product options, implementing new customer services, and training employees how to better understand how to best serve their customer in their respective departments.

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