You Have More Time to Grow Your Tax-Advantaged Retirement Account
The SECURE 2.0 Act includes dozens of changes to provisions related to tax-advantaged retirement accounts. One of the most important changes took effect January 1 of this year, which is the delay, until age 73, when account holders must start taking required minimum distributions (RMDs) from their 401(k) or IRA. The Act also specifies that RMDs will be delayed to age 75 beginning in the year 2033.
Defining RMDs:
Having a tax-deferred retirement account means you generally don’t pay taxes on the money in your traditional IRA or 401(k) when you invest. Instead, you pay taxes when you withdraw the funds during your retirement. The money will be taxed as income in retirement.
In short: Unless you’re saving in a Roth account, the IRS essentially makes you take out some money so it can be taxed.
Before the SECURE 2.0 Act was signed into law, you had to take RMDs starting with the year you turn age 72 or 70.5 (if you were born before July 1, 1949).
What Changed?
As of January 1, the age at which you must start taking RMDs increased. Therefore, if you are turning 72 in 2023 you now have until April 2025 to make your first withdrawal. If you are turning 73 in 2023 you have to take your 2023 RMD by this year-end. Additionally, the age rises to 75 in 2033.
These changes apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- Rollover IRAs
- Most 401(k) and 403(b) plans
How the Changes Benefit You:
The SECURE 2.0 Act gives your tax-advantaged account more time to grow tax free before you have to withdraw money and, therefore, owe taxes on it. Further, the law sets the stage for more RMD delays starting in 2033.
If you want to learn more about how to take full advantage of the new provisions, contact your Oppenheimer Financial Professional. They can help you navigate how to plan and invest for your future retirement.