Understanding RMD Changes Under SECURE 2.0
Understanding RMD Changes Under SECURE 2.0: Key Rules, Ages, and Planning Opportunities
Understanding RMD Changes Under SECURE 2.0
Required Minimum Distributions (RMDs) are one of the most important and complicated parts of retirement planning. The IRS rules tell you when you must begin taking money out of your tax-deferred retirement accounts and how much you have to withdraw each year. When Congress passed the SECURE Act in 2019 and then SECURE 2.0 at the end of 2022, those rules changed in meaningful ways.
For many retirees and pre-retirees, these changes created both new opportunities and new planning risks. Understanding how the updated RMD rules work can help you avoid penalties, better manage your tax bracket, and make more intentional decisions about your income and legacy plans.
What Are Required Minimum Distributions (RMDs)?
RMDs are the minimum amounts you must take out each year from most tax-deferred retirement accounts once you reach a certain age. These accounts include (but are not limited to):
Traditional IRAs
SEP and SIMPLE IRAs
401(k), 403(b), 457(b), and other employer-sponsored plans (for pre-tax balances)
The IRS gave you a tax break when you put money into these accounts or when investment growth occurred inside them. RMDs are the government’s way of saying, “You’ve had enough time to defer. It’s time to start paying taxes on that money.”
If you don’t take at least the required minimum, the IRS can assess a penalty on the amount you should have withdrawn. That is why knowing your RMD age and your annual required amount is so important.
How SECURE 2.0 Changed the RMD Age
One of the most widely publicized changes under SECURE 2.0 is the increase in the age at which RMDs must begin. Before the recent wave of legislation, the RMD age was 70½, then SECURE 1.0 moved it to 72. SECURE 2.0 pushed it out further in stages.
Under SECURE 2.0:
If you were born in 1951–1959, your RMD age is 73.
If you were born in 1960 or later, your RMD age is scheduled to increase to 75.
Practically speaking, this gives many retirees extra years of flexibility. Those additional years can be used to:
Delay taxable income if you don’t need the withdrawals
Convert a portion of pre-tax assets to Roth accounts strategically
Manage your tax bracket before Social Security, pensions, or RMDs fully “turn on”
However, it also means that when RMDs do start, you might have larger account balances, leading to larger required withdrawals and potentially higher taxes later.
Reduced Penalties for RMD Mistakes
Another significant SECURE 2.0 change is the reduction in the penalty for failing to take an RMD. Historically, the penalty was extremely steep: 50% of the amount you should have withdrawn but didn’t. That large penalty reflected how seriously the IRS views RMD compliance.
SECURE 2.0 lowered this penalty to 25%, and if the mistake is corrected within a certain period, it can be reduced further to 10%. This is welcome news, especially for retirees who are juggling multiple accounts or complex financial situations. It doesn’t mean you can ignore RMDs, but it does reduce the risk of a devastating penalty if you make an honest mistake and act quickly to fix it.
The takeaway: even though the penalty is lower, it is still meaningful. Systems, reminders, and coordination with your advisor or tax professional remain essential.
Employer Plans and Roth RMD Relief
SECURE 2.0 also addressed an odd inconsistency in the rules around Roth accounts in employer plans. Traditionally:
Roth IRAs did not have RMDs during the original owner’s lifetime.
Roth 401(k) and Roth 403(b) accounts did have RMDs during the original owner’s lifetime, unless the balances were rolled to a Roth IRA.
SECURE 2.0 eliminated RMDs for Roth balances in employer retirement plans starting in 2024 and beyond. This change aligns the treatment of Roth accounts across IRAs and workplace plans and simplifies planning. For many, it also reduces the pressure to roll Roth 401(k) money into a Roth IRA solely to avoid RMDs.
If you have both pre-tax and Roth balances in your employer plan, this creates more flexibility in deciding where future distributions should come from.
Inherited IRAs: SECURE 1.0 vs SECURE 2.0
Many people think of RMDs only in the context of their own retirement, but the rules for inherited IRAs and inherited employer plans are just as important. SECURE 1.0 introduced the “10-year rule” for many non-spouse beneficiaries, generally requiring that inherited IRA accounts be fully distributed by the end of the 10th year following the original owner’s death (with some exceptions).
SECURE 2.0 did not completely erase those rules, but it did add clarity and some nuances, especially around whether annual RMDs are due during that 10-year period in certain cases. Inherited RMD rules now depend on:
Whether the original account owner died before or after their required beginning date
Whether the beneficiary is a “eligible designated beneficiary” (for example, a surviving spouse, certain disabled or chronically ill individuals, or minor children of the account owner)
The relationship between the beneficiary and the original owner
Because the inherited RMD rules are layered and highly fact-specific, reviewing them with an advisor is especially important if you have inherited a retirement account since these laws took effect.
Planning Opportunities Created by the New RMD Age
Extending the RMD age does more than simply “delay the inevitable.” It creates a larger window for proactive planning, particularly in the years between retirement and when RMDs or Social Security benefits begin. Some strategies to consider include:
Roth conversions: Converting a portion of traditional IRA or 401(k) money to Roth accounts in lower-income years can reduce future RMDs and potential tax exposure later in retirement.
Bracket management: Intentional withdrawals before RMD age can help you stay within a target tax bracket, rather than being pushed into a higher bracket once RMDs start.
Coordinated Social Security timing: Deciding when to claim Social Security benefits is more strategic when you also factor in the new RMD age and anticipated distribution amounts.
The goal is not merely to delay taxes as long as possible, but to smooth out lifetime taxes and support your broader retirement and legacy objectives.
RMDs, Cash Flow, and Lifestyle
RMD changes under SECURE 2.0 also affect how retirees think about spending and cash flow. Some retirees depend on RMDs as their primary income, while others view them as a tax-driven nuisance. Either way, the rules now give more room to align your income pattern with your lifestyle.
If you do not need the full RMD for living expenses, you can:
Reinvest net distributions in taxable investment accounts
Use RMDs to fund charitable giving or gifting strategies
Allocate funds toward big one-time goals such as home projects or travel while planning for taxes
On the other hand, if you rely on distributions for monthly living costs, understanding how the new rules interact with your other sources of income helps you avoid surprises at tax time.
Qualified Charitable Distributions (QCDs) and RMDs
Qualified Charitable Distributions (QCDs) remain a powerful tool under the SECURE framework. A QCD allows IRA owners who meet the age requirement to send up to a certain amount per year directly from their IRA to a qualified charity. The amount sent via QCD can count toward the RMD and is excluded from taxable income.
SECURE 2.0 made adjustments in this area as well, including indexing certain limits for inflation over time. For charitably inclined retirees who don’t need all of their RMD for personal spending, QCDs can:
Satisfy part or all of the RMD
Reduce adjusted gross income
Potentially lower tax on Social Security benefits or Medicare-related costs
Given the complexity and the interaction with charitable goals, this is another area where personalized guidance can be valuable.
What These Changes Mean for You
The headline: SECURE 2.0 gives retirees more flexibility, but it also adds complexity. The new RMD ages, lower penalties, Roth account changes, and inherited IRA rules all interact with your income, tax bracket, estate plans, and charitable intentions.
Key questions to consider include:
At what age will your RMDs start under the new rules?
How large might those RMDs be relative to your lifestyle needs?
Are there windows of time where Roth conversions or intentional withdrawals could reduce future tax burdens?
How do your RMDs coordinate with Social Security, pensions, and other income sources?
If you have inherited or expect to leave retirement accounts, do your beneficiary designations and distribution plans reflect the post-SECURE environment?
Taking Your Next Step
RMD rules are no longer just a simple “start at 70½ and pull a formula amount.” SECURE 2.0 turned them into a more flexible — but also more technical — part of retirement planning. Understanding the new framework can help you avoid unnecessary penalties, build a more predictable tax picture, and align your distributions with the life you want in retirement.
If you are approaching RMD age, have recently retired, or have inherited a retirement account, it may be the right time to review your strategy. A thoughtful plan can turn what feels like a mandatory tax rule into a coordinated part of your broader financial picture.
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