New Rules Push Back RMD Start, Reduce Penalties
Category: Financial and taxes in retirement
January 20, 2023 — The end of the year presented several gifts to well off folks with substantial IRA, 401(k), or 403(b) balances. The biggest is that, thanks to the Secure 2.0 Act of 2022, the new age for taking Required Minimum Distributions (RMDs) from those accounts now begins at age 73, up from 72. That change started on Jan. 1, 2023; beginning on Jan. 1, 2033, the age goes up to 75. People who were already required to take those distributions must continue to make them.
The Act also provided a big benefit to people who fail to take their RMDs on time. Previously the penalty was an onerous 50% of the required distribution. Now that is reduced to 25%, and 10% if corrected in a “timely manner”. Catch up contributions for people over 50 and 60 also were increased, and there were other provisions to encourage employers to help employees save more for retirement.
Comments on "New Rules Push Back RMD Start, Reduce Penalties"
Clyde says:
Although those who are fairly well off can often avoid taking RMDs until they’re required to (now age 73 as the article points out), a lot of middle class folks can avoid taking RMDs if they have enough Social Security, pension income and outside savings. So this new law pushing the required RMD back a year can be helpful for quite a few more than wealthy people, even if just for a year. Also, as the article indicates, if you’re currently required by age to take RMDs, the new law pushing the age back obviously doesn’t apply.
JCarol says:
This delay helps the many seniors who want to work past 70.
Hubby & I are retiring at in 2023, but would have worked a few more years if not for federal income taxes on 85% of our SS.
We've committed to our customers to stay in business through 2023, despite knowing we'll get slammed hard by the IRS. (Now 70, DH starts drawing maximum SS this month against his own earnings record, rather than spousal benefits.)
If RMDs were still required at 70-1/2, more seniors would be put off from working past that age. We'd have quit working December 2022 if that were the case.