{"id":14220,"date":"2023-01-17T14:51:02","date_gmt":"2023-01-17T20:51:02","guid":{"rendered":"https:\/\/johnsonwim.com\/?p=14220"},"modified":"2023-01-17T14:51:20","modified_gmt":"2023-01-17T20:51:20","slug":"rmd-changes-in-2023","status":"publish","type":"post","link":"https:\/\/johnsonwim.com\/rmd-changes-in-2023","title":{"rendered":"RMD Changes in 2023"},"content":{"rendered":"

In Iowa and across the nation, a new year brings new policies. As Congress passed a major boost to retirement savers via the SECURE Act 2.0, here’s what you need to know about major changes to RMD rules that kicked in Jan 1.<\/strong><\/p>\n

Retirement<\/a> is a big part of the American Dream. You work hard in order to save money for your golden years to help ensure you can enjoy your post-work life.<\/span><\/p>\n

The SECURE 2.0 Act of 2022<\/a> is changing the ways Americans save for retirement. These new rules were approved by President Biden, and they will be reforming RMDs (Required Minimum Distributions). For retirees or those approaching retirement who are worried about mandatory retirement account distributions, getting up to speed on the new RMD changes is very important.<\/span><\/p>\n

Here\u2019s what you need to know about those new rules and how they will affect your retirement plans.<\/span><\/p>\n

RMD Penalties<\/b><\/h4>\n

It’s a tough penalty to swallow, and it’s also one of the heaviest penalties in the entire tax code. What are we talking about? Consequences of missing the RMD deadline.<\/span><\/p>\n

Failing to take an RMD or missing an RMD usually resulted in getting hit with a 50% excise tax<\/a> on the distribution shortfall. However, if you mistakenly missed the deadline, you can help avoid the additional penalty by claiming \u201creasonable error\u201d and you should withdraw the necessary amount from your retirement quickly.<\/span><\/p>\n

One example of reasonable error is falling sick due to a serious illness. Should this happen, you can ask for a <\/span>penalty waiver form <\/span><\/a>and send it to the IRS explaining why you didn’t take your RMD. From there, the IRS will be able to accept or reject your request.<\/span><\/p>\n

2023 Changes:<\/strong> Since January 1st 2023, the SECURE 2.0 Act reduces the penalty to 25% in all cases. In addition, the penalty drops down to 10% if you take the necessary RMD by the end of the second year following the year it was due. So, for example, if you fail to take an RMD due in 2022, the penalty is knocked down to 10% if you withdraw the necessary funds by December 31, 2024.\u00a0<\/span><\/p>\n

RMDs and Roth 401(k)<\/b><\/h4>\n

You’ve been working hard for years, and now it’s time to reap the rewards. But how do you know when to start taking distributions from your retirement accounts<\/a>?<\/span><\/p>\n

The good news is there are no required minimum distributions (RMDs) for Roth IRAs. However, RMDs are currently required for Roth 401(k) accounts. You can get around the Roth 401(k) RMD rules by rolling over the money into a Roth IRA. But watch out for the Roth IRA five-year rule \u2013 if you’re not careful, you may have to wait five years to pull your money out of the Roth IRA.<\/span><\/p>\n

2023 Changes:<\/strong> The SECURE 2.0 Act does away with the need to roll over funds from a Roth 401(k) to a Roth IRA. Instead, as with Roth IRAs, Roth 401(k) accounts won’t be subject to the RMD rules before the account holder dies (post-death minimum distribution rules still apply). This change generally kicks in starting in 2024; however, an exception applies to RMDs required before 2024 but not required to be paid until January 1, 2024 or later.<\/span><\/p>\n

Annuities and RMDs<\/b><\/h4>\n

Annuities<\/span><\/a> are helpful to many, but they have their problems. For instance, if you happen to have an annuity in your retirement account, you may be very unhappy with the way things are currently set up.<\/span><\/p>\n

Under prior law, when a retirement account included an annuity, the account was split into two parts: one for distributions from the annuity, and one for distributions from everything else. This could result in higher RMDs than necessary.<\/span><\/p>\n

2023 Changes:<\/strong> The SECURE 2.0 Act allows the following payments if these requirements are met:<\/span><\/p>\n