2 New Required Minimum Distribution (RMD) Rules Everyone Must Know Before 2025

As we approach 2025, it's crucial for investors to stay informed about changes in the required minimum distribution (RMD) rules. The SECURE Act 2.0, enacted in 2022, introduced two significant changes that will impact retirement savers. Let's dive into these new rules and understand how they may affect your financial planning.



1. Delayed RMD start age

The first notable change is the delayed RMD start age. Traditionally, RMDs began at age 70½ for those born before July 1949, and age 72 for those born between July 1949 and December 1950. However, the SECURE Act 2.0 increased the starting age to 73 for individuals born in 1951 or later. This change allows accounts to grow tax-deferred for an additional year, potentially leading to a larger RMD in the first year.



While this delay may seem beneficial, it's essential to consider the potential tax implications. The additional year of tax-deferred growth could result in a larger RMD in the first year, pushing retirees into higher tax brackets and increasing their overall tax burden.

2. Roth 401(k) RMD elimination

The second significant change is the elimination of RMDs for Roth 401(k) accounts. Before 2024, Roth 401(k) accounts were subject to RMD rules, but the SECURE Act 2.0 removed this requirement. This change aligns Roth 401(k) rules with Roth IRA rules, which have never been subject to RMDs during the account holder's lifetime.



This change is particularly beneficial for those who wish to leave their Roth 401(k) accounts to their beneficiaries. Without RMDs, the account can continue to grow tax-free, potentially providing a larger inheritance for beneficiaries. Additionally, investors have more flexibility in their retirement planning, as they can choose to withdraw funds from their Roth 401(k) accounts without worrying about RMDs.

In conclusion, the two new RMD rules introduced by the SECURE Act 2.0 have significant implications for retirement savers. The delayed RMD start age may increase the overall tax burden for retirees, while the elimination of RMDs for Roth 401(k) accounts provides greater flexibility and potential benefits for beneficiaries. As we approach 2025, it's essential to understand these changes and adjust your financial planning accordingly. Consult with a financial advisor to ensure you're making the most informed decisions about your retirement savings.