RMD Age Changing Again? SECURE ACT 2

Legislation that was approved in the House toward the end of March has the Required Minimum Distribution (RMD) age set to change again if fully approved.

The proposed legislation would not change the RMD age for anyone who has begun required distributions, only for those who haven’t yet. If approved, the RMD age would be 73 for those who will turn 72 between January 1st, 2023, and the end of 2029. The RMD age will be 74 for people who turn 73 after Dec. 31, 2029, and before Jan. 1, 2033, and age 75 for people who turn 74 after Dec. 31, 2032.

This could have significant tax planning implications on pre-retirees who are considering strategies such as QCD’s or Roth conversion ladders. These extra couple of years expands the tax planning window by a considerable margin. Consider a retiree who is retiring at 67 and wants to convert $500,000 of their IRAs to Roth IRAs over 5 years, before the required minimum distributions start at 72. They may now be able to spread out that tax burden over 2-3 more years and lower their effective tax rate.

Given that individuals are living longer, the extension of the RMD age makes sense. I think we are likely to see similar changes in other policies, such as the Social Security “full retirement age” in the years ahead.

Thank you for reading,

Alex

This blog post is not advice. Please read disclaimers.