Close this search box.

SECURE 2.0 Act Changes RMD Rules for IRAs

Jaron Carmichael, CFP®, AIF®

Director of Retirement Group, Wealth Advisor


Among its numerous changes to retirement planning, the SECURE 2.0 Act will allow many retirement account holders to wait longer before taking required minimum distributions (RMDs) from their funds.

A couple in their living room looking at paperwork

The newly enacted SECURE 2.0 Act is changing many of the rules governing retirement plans over the next three years. For example, individual retirement account (IRA) holders can now wait longer to begin taking annual required minimum distributions (RMDs) from their accounts.


Changes to IRAs

SECURE 2.0 raised the RMD starting age from 72 to 73 for IRA owners as of January 1. In 2033, the starting age will increase to 75. That’s good news for people who don’t expect to rely on RMD income in their early years of retirement, because they’ll be able to avoid paying income tax on that money for an extra year or longer.

The new law also allows IRA owners to defer their first RMD until April 1 of the following year, if they choose. Delaying that initial RMD, however, would then require RMDs from the account in the second year. While this choice could make financial sense for retirees in certain situations, it might result in paying higher cumulative income tax.

Another benefit of SECURE 2.0 is that it reduces the IRS penalty imposed on retirees who fail to take an RMD during the year. Previously assessed as 50% of the untaken RMD amount, the penalty is now set at 25%. The IRS will further reduce this penalty to 10% for account owners who subsequently take the missed RMD and file an amended income tax return in a timely manner. Here’s an example:

Jane has an RMD of $10,000 for 2023. After taking out $2,500 early in the year, she forgets to take the remaining $7,500 distribution. Her penalty is calculated as 25% of $7,500, or $1,875. If Jane catches the error early in 2024, takes a corrective distribution of $7,500, and files an amended 2023 tax return, the IRS penalty will be reduced to $750.


Change to Roth accounts

SECURE 2.0 also introduces an RMD change that affects the owners of certain Roth retirement accounts. Beginning in 2024, balances in designated Roth accounts—Roth 401(k), Roth 403(b), and Roth 457 plans—are no longer subject to RMDs.

This change aligns the distribution rules of Roth IRAs and designated Roth accounts. Roth IRAs already were exempt from RMDs during the original owner’s lifetime. When designated Roth accounts were created, however, the law maintained RMDs on those accounts because employer contributions would be taxable upon distribution. Under the SECURE 2.0 Act, all Roth accounts are treated the same. In addition, holders of a designated Roth account may still roll over the balance to a Roth IRA upon retirement.


Talk with your advisor

We encourage you to work closely with a trusted financial advisor in evaluating how SECURE 2.0 may influence your overall wealth management strategy. Visit our SECURE 2.0 Act resources page to learn more. You can replay webinars highlighting various benefits of the new law, read additional commentary by Mercer Advisors senior wealth managers, and keep up with the latest news about this important legislation.

Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.