Attention anyone with a 401(k), IRA, or qualified retirement savings account. The Secure Act 2.0 has been approved by Congress and is set to be signed into law by the President.
Within this bill is an important component regarding Required Minimum Distributions (RMDs)…
Individuals born between 1951 and 1959 will have to start RMDs at age 73 now, while the RMD age for those born in 1960 or later will be 75.
This piece is very important for retirement planning because it could potentially create additional years of lower income for retirees. During this period, Roth Conversions might make sense because you will be taxed in lower ordinary income brackets for the conversions.
In addition, the bill decreases the penalty for missed/partial RMDs from 50% to 25% of the shortfall. If the mistake is corrected, the penalty has been reduced to 10%.
Lastly, but VERY important. You no longer must take employer plan Roth 401(k) RMDs. This feature of the bill gives individuals the opportunity to grow a greater amount of their investments tax-free for a longer period of time.
Secure Act 2.0 – Required Minimum Distributions
Corey Shevlin
Corey serves as an investment adviser representative and handles the investment related administration for The Lynch Financial Group. He currently holds his Series 65, Life and Health Insurance licenses. He attended the University of Delaware and graduated with a Bachelor’s degree in Political Science and Criminal Justice in 2019.