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Securing Your Future Planning

Securing Your Future Planning

| September 01, 2023

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was enacted on December 20, 2019. Many of you are aware of how this act increased the age at which Required Minimum Distributions (RMDs) from 70 ½ to 72, as well as other important changes. Well, SECURE 2.0 was signed into law by President Biden on December 29, 2022 as part of a larger appropriations bill to fund the government. SECURE 2.0 makes it easier to save for retirement, easier to preserve savings in retirement, and easier for businesses to provide retirement benefits. I thought I might highlight two of the key changes that may affect how we plan for you.

New Distribution Limit on Inherited Money from Retirement Accounts (Non-Spouse Beneficiaries)


The SECURE Act imposes a 10-year distribution limit for most non-spouse beneficiaries to spend down inherited IRAs from original owners who have passed away on or after January 1, 2020. Before passage of the act, withdrawals from inherited accounts could be stretched over the life of beneficiaries to lessen taxes. Exceptions to the 10-year rule include assets left to a surviving spouse, a minor child, a disabled or chronically ill beneficiary, and beneficiaries who are less than 10 years younger than the original IRA owner or 401(k) participant.


Potential Action Plan: Let’s plan on reviewing your current beneficiary designations for any retirement accounts you currently have to determine if this new provision could potentially affect you and your heirs. If you're a beneficiary of an inherited IRA or 401(k) and the original owner passed away prior to January 1, 2020, you don't need to make any changes.


Required Minimum Distribution (RMD) Changes: 

The SECURE Act of 2019 raised the age for RMDs from 70½ to 72.  SECURE 2.0 further raises the RMD age from 72 to 73 in 2023, and 75 in 2033. 

If the account owner turned 72 in 2022 or earlier, he/she will still need to continue taking RMDs as scheduled. If the owner is turning 72 in 2023 and has already scheduled withdrawals, he/she has the option to update the retirement account withdrawal plan.

Starting in 2024, Roth accounts in employer retirement plans will be exempt from RMD requirements.

And beginning immediately, for in-plan annuity payments that exceed the participant's RMD amount, the excess annuity payment can be applied to the year's RMD.

Additionally, SECURE 2.0 reduces the penalty tax for failures by an individual to take the minimum distribution from 50% to 25%. Further, if the failure is corrected in a timely manner, the excise tax is reduced from 25% to 10%. These changes are effective for 2023.

Potential Action Plan: Evaluate IRA distributions based on long-term needs of you and your heirs, with tax considerations now being more prominent.

These two changes – and a few others in the SECURE Act, may have an impact on how we efficiently plan for your future. Taxes can take a big bite of your assets. If you would like to review how the changes might affect your plan – let us help!