SSome retirement savers have seen how a new law changed the rules on how and when they can make a withdrawal from their money, through RMD’s, which means they need to follow some required minimum distribution rules.
For instance individual retirement accounts or 401 (k) plans, which are tax-advantaged accounts for the saver’s golden years, carry this type of rules.
An RMD forces an individual to take out money from his account after reaching a certain age, with the purpose of raising their income tax revenue, meaning they’ll have to pay taxes on those savings, preventing them from using their accounts as tax shelters.
President Biden signed a bill affecting retirement savers
Last Thursday, right before the end of the year, President Joe Biden signed a $1.7 trillion dollar legislative package, called Secure 2.0that among many measures, some affect retirement savers.
For instance, the required minimum distribution age was raised to 73 years, from the current 72 years old, but from 2033 and on, that age threshold will be raised to 75.
Another change is that RMD’s are now eliminated from Roth 401 (k), which means that starting in 2024, those who invested in retirement plans like this one will no longer have to take RMD’s.
With the third significant change coming from the reduction of RMD’s tax penalties.
Previously, the tax penalty was 50% of the RMD amount that the individual had failed to withdraw, but now it has been lowered to 25% and could even come down to the 10% mark.