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Important changes to Required Minimum Distributions that impact FFM clients

Important changes to Required Minimum Distributions that impact FFM clients

May 04, 2023

In 2019, the Setting Every Community Up for Retirement (SECURE) Act increased the starting age for Required Minimum Distributions (RMDs) from 70½ to 72 for IRA owners, defined contribution plans participants, and those participating in 403(b)s and governmental 457(b) plans. This increase applies to those who reached 70½ after 2019. On December 29, 2022, Congress signed into law the SECURE 2.0 Act that further increases the RMD starting age even further. The new starting ages are as follows:

  •  A participant born in 1950 or earlier already should have started taking RMDs and must continue for every year going forward.
    • Reminder: If the participant attained age 72 in 2022, they have until April 1, 2023 to take their 2022 RMD. All other RMDs must be distributed by the end of the year to which they apply.
  • A participant born from 1951–1959 must start taking RMDs in the year they reach age 73. And,
  • A participant born in 1959 and after must start taking RMDs when they reach age 75. 

The following table provides a snapshot of when RMDs begin. Note: There is an overlap for someone born in 1959, as they fall into the age 73 and 75 groups.

For an IRA, the first RMD would be due in the year they reach RMD age. Alternatively, they can wait to take the first RMD by April 1 following the year they attain RMD age. If the first RMD is postponed to the following year, two RMDs must be taken in the same year (one by April 1 and the second by December 31). Subsequent RMDs must be taken by December 31 each year thereafter. 

For a qualified plan such as a 401(k) with a participant who does not own more than 5% of the company, the first RMD would be due in the year they reach RMD age or retire, if later. Alternatively, they can wait to take the first RMD by April 1 following the year they attain RMD age or retire. If the first RMD is postponed to the following year, two RMDs must be taken in the same year (one by April 1 and the second by December 31). Subsequent RMDs must be taken by December 31 each year thereafter.

Please be advised this document is not intended as legal or tax advice. Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor.