Understanding Secure Act 2.0

January 24, 2023

Three years ago, the original Secure Act moved the Required Minimum Distribution (RMD) age from qualified pre-tax retirement accounts such as IRAs, 401(k)’s, 403(b)’s, etc., from age 70.5 to age 72. The Secure Act 2.0 passed Congress at the end of 2022 and has made further changes related to pre-tax retirement accounts, qualified charitable distributions (QCDs), etc.

RMD Age-Adjusted Up

The Secure Act 2.0 made the following changes for 2023 related to RMDs:

Adjusts the RMD age up from 72 to 73
Adjusts the RMD from age 73 to 75
Roth 401(k) account holders are NO LONGER required to take RMDs during their lifetime

The implications of these changes vary depending on the individual. Recommendation: Analyze your specific situation to determine if it makes sense to take distributions from your pre-tax accounts even if it’s not “required.” For example, the execution of an IRA to Roth Conversion.

Qualified Charitable Distribution (QCDs)

QCDs are charitable gifts made directly from pre-tax retirement accounts. These have increased in popularity over the past several years due to the substantial increase in the federal standard tax deduction, and the elimination of certain state and local itemized deductions. Things to know about the QCD:

You can utilize in the year you turn age 70.5
If 73, or older, and subject to RMDs, your QCD counts towards the requirement
Annual limit of $100,000 (**2024 Change**: $100,000 limit indexed to inflation)
QCD is an “Exclusion” from income, NOT a Charitable Deduction (Exclusions are better as they potentially reduce taxes related to Social Security, and surcharges related to Medicare)

While most may not come close to reaching the annual contribution limit, it is worth noting if significant charitable contributions are a part of your future financial plan. Recommendation: Consult a Certified Financial Planner™, or accountant, to determine the best way to fulfill your charitable goals based on your case facts.

For weekly insights, follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.

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