How New SECURE 2.0 Act Provisions Affect Required Minimum Distributions

Saving for retirement can be challenging, but the SECURE 2.0 Act, passed by Congress at the end of 2022, aimed to make it easier. The act included a sweeping series of changes to retirement accounts to encourage Americans to save more for retirement.

On Jan. 1, 2024, new SECURE 2.0 provisions related to required minimum distributions (RMDs) went into effect. Here’s what to know, and how they could impact your retirement planning.

What Are RMDs?

RMDs are the minimum mandatory amounts you need to withdraw from retirement accounts, such as an IRA or employer-sponsored 401(k), once you hit a certain age.

The current RMD age is 73, and by 2033, SECURE 2.0 will increase that to 75 (though it’s important to note that this change will not impact anyone already taking RMDs). This gives Americans additional time to save for retirement and put off taking distributions from their accounts, which are treated and taxed as regular income.

What’s New for 2024?

Two new SECURE 2.0 provisions related to RMDs include:

• Roth Funds: According to SECURE 2.0, Roth funds in employer-sponsored retirement plans such as a 401(k) are no longer required to be included in the calculation of your RMDs, and do not need to be distributed as an RMD from your account. This means that you can delay withdrawing from your Roth accounts until you need the funds in retirement, giving your investments more time to grow.
• RMD Penalty: Previously, if you failed to take your RMD in a timely manner as required by the IRS, you would have been assessed a penalty of up to 50% of the missed required withdrawal amount. As of Jan. 1, 2024, that penalty has been reduced to 25%, or even 10% if the mistake is corrected within two years, according to SECURE 2.0.

RMDs can be complicated, but Bell Bank Wealth Management’s retirement plan services division works with employers and their employees to help make sure withdrawals are calculated correctly and taken in a timely fashion. If you have questions about RMDs or SECURE 2.0, call our retirement plan service center at 855-225-2355.