The ability to delay required minimum distributions (RMDs) has always been a factor for retirement plans; but now there is a new rule involving someone's age.
One of the provisions of the recently passed SECURE 2.0 that has gotten the most attention is the one that allows some retirement account owners to delay their required minimum distributions (RMDs) a little longer. The new law pushes back the RMD age from 72 to 73. Eventually, it will go to 75, but that is not for another decade.
Who can benefit from this new rule?
The delayed RMD age applies to those who reach age 72 in 2023 or later. They will not have to start taking RMDs until next year (2024) when they reach age 73. The deadline for taking their first RMD would be April 1, 2025.
Example: Mick Mars, guitarist for the heavy metal band Motley Crue, will no doubt celebrate his 72nd birthday on May 4, 2023, with an all-night rager. He can also celebrate being able to delay his RMD from his retirement account. Mick will have to start taking RMDs for 2024 when he reaches age 73. He will need to take his first RMD by April 1, 2025.
Those who reached age 72 in 2022 are not so fortunate. They will be 73 in 2023, but they must continue to take RMDs.
Example: Stevie Van Zandt, guitarist for Bruce Springsteen and the E Street Band, may be born to run but he cannot run away from RMDs. He reached age 72 on November 22, 2022. He must take an RMD for 2022 by April 1, 2023, and will have to take his 2023 RMD by December 31, 2023.
If you reach age 72 this year, you are like Mick and you catch a break under SECURE 2.0. You can delay your RMD a little longer. You can party hard like Mick and celebrate that on your 72nd birthday.
However, if you are reaching age 73 this year, you and Stevie have something in common. You can’t outrun your 2023 RMD. You will need to take it by the end of this year.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC