On December 29, 2022, the SECURE 2.0 Act was passed in an effort to make retirement planning easier for federal retirees. The Act, however, contains myriad provisions and may be difficult to comb through for someone looking to adapt their retirement plans to take advantage of the more lenient new rules. Staying abreast of legislative changes to retirement requirements and benefits can help ensure there are no surprises when the time comes to begin withdrawing retirement funds. And knowing how to plan around certain requirements during early retirement planning can ensure your nest egg is as large as it needs to be to meet your needs when your retirement day approaches.
Required Minimum Distributions Changes
Many of the SECURE 2.0 Act’s new provisions are around required minimum distributions or withdrawals that must be taken from certain retirement accounts, such as traditional IRAs or Thrift Savings Plans, when the account holder reaches a certain age. These rules stand to make sure retirement accounts are not used as wealth transfer vehicles but are instead used by a retiree during their lifetime.
The act now delays the start age from 72 to 73 starting in 2023, and it will increase again to 75 in 2033. Financial planners caution that this may not be beneficial for tax purposes, though on its face, it seems more lenient. And for individuals close to these minimum ages, more time to plan and strategize could be a benefit. Always conduct a financial planner and your attorney when planning these withdrawals.