Elissa Wurf, PhD, CFP®, CPA
Written by: Elissa Wurf, PhD, CFP®, CPA
At Agili, we like to help you, our clients and friends, better understand how legislation affects your finances.
You probably have heard about the legislation that was passed in December 2022, the Secure 2.0 Act. This Act has wide-ranging impacts on both workers and retirees. We are introducing a series of blog posts about the important elements of the Act that may affect you and your finances.
At What Age Is a Taxpayer Required to Take RMDs?
You may be aware that one of the headline changes from the Secure 2.0 Act has to do with Required Minimum Distributions or RMDs. RMDs are the minimum amount of money that account holders of a certain age must withdraw from a pre-tax retirement account in a calendar year. The biggest news from the Act is the change in the age at which a taxpayer is required to take RMDs. The Act raised the age at which you must begin taking RMDs:
- The age at which those born between 1951 and 1958 must take RMDs is now 73. (It had been at age 72.)
- The age at which those born in 1959 must take RMDs needs some clarification, but, at this point, it is safest to assume that it would be age 73. There is some possibility that when the drafting of the law is clarified that it could end up being age 75.
- Taxpayers born in 1960 or later are now required to begin making RMDs at age 75.
For those born in 1951, according to the IRS, “…[i]f you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024.” However, if the first RMD is delayed until April 2025 (which would relate to tax year 2024), a second RMD for tax year 2025 would need to be taken by December 31, 2025. In other words, the person would end up taking two RMDs in one year and would owe tax accordingly. In most circumstances, it would be most tax-efficient to take the first RMD by December 31, 2024, but the situation should be reviewed with your Financial Strategist since individual circumstances may differ.
Additional Resource:
The IRS published a comprehensive FAQs page on the topic of RMDs: Retirement Plan and IRA Required Minimum Distributions FAQs.