RMD Requirements Under Secure Act 2.0

Required Minimum Distribution (RMD) for Retirees 

TL; DR:  

1. RMDs are not required until Age 73 for individuals born between 1951 and 1959.
2. IRS allows for penalty relief for those that did not take RMDs on non-spouse inherited IRAs, but RMD requirements resume in 2024 *without* penalty relief.

Changes in RMD Age Requirement: The SECURE 2.0 Act, effective beginning 2023, has altered the age at which RMDs must start. Previously, as part of Secure Act 1.0, individuals were required to begin taking RMDs at age 72. However, for those reaching age 72 after December 31, 2022, the new required beginning date for RMDs is age 73. This means if you reach age 72 in 2023, you are not required to take your first RMD until April 1, 2025, which applies to the 2024 tax year. This change aims to reflect longer life expectancies and allows more time for retirement savings to grow. 

SECURE Act 2.0's Changing Scale of RMD Requirements Based on Birth Years: The SECURE Act 2.0 introduced a tiered approach to RMD requirements based on an individual's birth year. This change reflects an adjustment to longer life expectancies and aims to provide more time for retirement savings to accumulate. The key points are as follows: 

• Individuals born before 1951 are already subject to RMDs. 
• For those born between 1951 and 1959, the age to start RMDs is now 73. 
• Individuals born in 1960 or later will have to start RMDs at age 75. 

Confusion Related to new 10-Year Rule for RMDs of Inherited IRAs Based on Secure Act 1.0 

Following passage of Secure Act 1.0 and the newly enacted 10-Year rule for non-spouse beneficiaries, there was confusion regarding whether RMDs would be required over the 10-year period or if the entire account would simply need to be withdrawn by year 10. The presumption among many tax and financial professionals was the latter – that the account would need to be exhausted by year 10 – until the IRS issued proposed guidance indicating RMDs would be required over the 10-year period. The IRS then doubled down on the RMD guidance being applicable to each year under the 10-year period; however, it also provided relief for non-compliant taxpayers. 

Notice 2023-54's Relief for Inherited IRAs Under the 10-Year Rule:  

Notice 2023-54 provides relief for beneficiaries who may have missed RMDs, especially those who were unaware of their obligations under the new rules. This transition relief is particularly significant as it addresses the confusion and lack of clear guidance following the enactment of the original SECURE Act. Beneficiaries who failed to take RMDs due to this uncertainty will not face the usual 50% penalty typically imposed for missed distributions. The penalty abatement is automatic and does not require the filing of amended returns.