What Retirement Plan Owners Need to Know About RMDs Going into the New Year
The “Required Minimum Distribution” (RMD) for a retirement account are the rules that the IRS sets for how much a plan owner needs to withdraw in a given year. These rules are updated from time-to-time, and here are some important changes we’ll see in the upcoming year.
For IRA Plan Owners, RMD Age Has Increased
Starting in 2023, new, IRA-related rules in the Secure 2.0 Act raised the minimum age to start required IRA distributions to age 73. The modified rule states that if an IRA or Defined Contribution plan owner reaches age 72 in year 2023, the first Required Minimum Distribution will be in 2024 (or the tax filing deadline in 2025).
RMD Changes for Inherited IRA’s
No more “stretch” IRA. Prior to the Secure 2.0 Act, owners of inherited IRA’s, also called Beneficiary IRA’s, could “stretch” distributions of the IRA balance over their own lifetime. Now, non-spouse beneficiaries (with some exceptions) of an inherited IRA account or a defined contribution plan, where the owner died after December 31, 2019, must distribute 100% of the balance within 10 years.
Non-spouse beneficiary heirs of IRA accounts and defined contribution plan accounts whose original owner died prior to December 31, 2019 are grandfathered under the previous rules, which require annual RMD distributions, based on the heir’s life expectancy.
Contribution Limit Changes for 2024
In November, the IRS published guidelines for various contribution limits in 2024. For defined contribution plans like 401(k), 403(b) and many 457 plans, contribution limits increased to $23,000. For plan participants over the age of 50, the additional “catch-up” contribution limits remained at $7,500. For individuals eligible to contribute to an IRA or Roth IRA, the limit in 2024 was increased to $7,500, with an additional “catch-up” limit of $1,000 for savers over the age of 50.
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Disclaimer
This material is provided by Schmitt Wealth Advisers for informational purposes only. Schmitt Wealth Advisers does not provide tax or legal advice, and nothing herein should be construed as such. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Opinions expressed by Schmitt Wealth Advisers are based on economic or market conditions at the time this material was written. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from publicly available sources (unless otherwise noted) and are believed to be reliable. Schmitt Wealth Advisers, however, cannot guarantee the accuracy or completeness of such information. Past performance may not be indicative of future results.
