How Does SECURE 2.0 Affect RMDs?

Readers are already asking questions about how SECURE 2.0, the new act that was signed into law at the end of 2022, affects RMDs (required minimum distributions) from IRA and other tax-deferred accounts.

The Changing Landscape

In 2022, under the SECURE Act (now referred to as SECURE 1.0), the RMD age was 72. SECURE 2.0, which was signed into law in late December 2022, changed the RMD age from 72 to 73. Before Jan. 1, 2020, when SECURE 1.0 was adopted, the RMD age was 70 1/2.

Born in 1950? 72 or 73?

If you were born in 1950, you were age 72 in 2022 when the age 72 rule was in place. And, you were (or will be) age 73 in 2023 when SECURE 2.0 changed the rule to age 73. Which law applies?

If you look at the statutory language, you’ll see the answer. I’m quoting Section 107 of SECURE 2.0, under “Applicable age”: “In the case of an individual who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the applicable age is 73.”

If you were born in 1950, you attained age 72 before (not after) Dec. 31, 2022. So, it’s the 2022 rule for you: age 72, not age 73.

Year of Birth Matters

SECURE 2.0’s age 73 rule applies to those born in 1951 or later. Those born in 1951 turn 73 in 2024; born in 1952 equals 73 in 2025; born in 1953 equals 73 in 2026; and so on through 1959 in 2032, when another SECURE 2.0 change comes into effect, raising the age to 75 in 2033.

A Wrinkle: Does SECURE 2.0 Affect the April 1 Rule for Those Born in 1950?

Some 72-year-old IRA owners waited to take their first RMDs until early 2023 before their required beginning dates (RBDs) of April 1.

The first (and only the first) RMD can be delayed into the early part of the following year. The 2022 RMD must be taken by April 1 of the following year, in this case by April 1, 2023.

That calculation would be based on 12/31/2021 IRA values, whether taken in 2022 or before April 1, 2023. If the 2022 RMD were delayed, the IRA owner would also need to take his or her 2023 RMD by the end of 2023 based on 12/31/2022 values.

What if you were born in 1950 and have not taken your first RMD yet? Can you rely on the age 73 RMD to wait a year before taking your first RMD?

That is, would you be in a position to choose to switch to a 2023 RMD with a 12/31/2022 valuation date as opposed to a 2022 RMD with a 12/31/2021 valuation date?

Returning to the language of SECURE 2.0, the answer would be no. Again, the individual has to reach “age 72 after December 31, 2022” to benefit from the age 73 applicable age. Again, someone born in 1950 would reach age 72 before December 31, 2022.

Software to Calculate RMDs

This conclusion is consistent with RMD software updated for SECURE 2.0, such as Brentmark’s (brentmark.com).

Someone born in 1950 has a first RMD for the year 2022, when the individual turned 72, with a divisor of 27.4 for age 72 and an RBD of April 1, 2023.

The first RMD for those born in 1951 is 2024, when they turn 73; the RBD is April 1, 2025; the divisor at age 73 is 26.5; the 12/31/2023 balance is used to calculate the 2024 RMD.

Brentmark software is available for purchase ($199) to use if you want to run reports for yourself based on your date of birth and account value. You can also assume a rate of return and see how beneficiary information impacts the results. (Conflicts disclosure: I subscribe to Brentmark software. Also, the Brentmark website posts links to some of my Forbes articles, for which I receive no compensation from Brentmark.)

Free RMD Calculator

A free site for RMD calculations is offered by the U.S. Securities and Exchange Commission (SEC).

You enter your account balance as of the end of last year (Dec. 31) and your age at year end (how old you will be at the end of the year). The calculator will give you a withdrawal factor and a dollar amount of the RMD. The withdrawal factor is based on Table III: Uniform Lifetime Table.

A different table (not included in the site) applies if your spouse is 10 years younger than you are (Table II: Joint Life and Last Survivor Expectancy).

Caveat: Check With Your Tax Adviser

As always, be sure to check with your tax adviser before taking any action on RMDs. Even using the SEC calculators can take you down the wrong path unless you know the rules that apply to your unique situation.

More to Come

SECURE Act 2.0, which was part of the Consolidated Appropriations Act, 2023 that was signed into law by President Biden on Dec. 29, 2022, has more than 90 retirement plan provisions, some of which take effect now in 2023, some in 2024 or later. More posts to come on these changes . . .

Questions?

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