If you’ve been hearing about changes in retirement plans and need to understand what’s going on, this blog is here to help. Let’s break down the latest news on Required Minimum Distributions (RMDs) from the IRS and explain it in simple terms.

What’s an RMD?

An RMD is a Required Minimum Distribution. When you reach a certain age, you must start withdrawing a minimum amount from your retirement accounts like Individual Retirement Accounts (IRAs), 401(k)s, and other similar plans. The reason for this rule is to make sure people don’t keep their retirement savings indefinitely, avoiding taxes.

What Changed?

The IRS has extended some transition relief regarding RMDs. This means they’re giving more time and flexibility to people affected by recent changes in RMD rules, specifically those introduced by the SECURE 2.0 Act of 2022.

Here’s what you need to know:

The SECURE 2.0 Act changed the “required beginning date” (the age when you must start taking RMDs) for many retirement plans.

Previously, if you turned 72 in 2024, you’d have to start taking RMDs by April 1, 2025. However, the new rule delays the required beginning date by one year. Now, if you turn 72 in 2024, your required beginning date is April 1, 2026.

This extension provides additional transition relief to plan administrators, payors, plan participants, IRA owners, and beneficiaries who were affected by these changes.

Final regulations related to these RMDs will not apply until 2025, giving everyone more time to adjust to the new rules.

Why Is This Important?

If you have a retirement plan, these changes could impact when you need to start taking distributions. It’s especially significant if you’re nearing the age when RMDs would typically begin. This extension gives you more time to plan your withdrawals, allowing you to potentially defer paying taxes on those distributions for an additional year.

What Should You Do?

If you have an IRA or another retirement plan, it’s a good idea to check with your plan administrator or financial advisor to understand how these changes affect you. They can help you navigate the new rules and ensure you’re taking the right steps to comply with the extended RMD transition relief.

Please contact us at www.rbfco.com if you have any questions on how these changes may impact your taxes.