SECURE Act 2.0 – RMD Age Changing Again

Hello, and welcome into Mr. Stillman's Opus.

I am Ben George. Glad to have you on the show today. Well, the new year has brought some new changes to retirement planning specifically because of Secure Act 2.0. You might not have heard of it, but it did pass late December of last year and much, much of it has been enacted here in 2023. So we want to kind of bring you up to speed on that here on the podcast.

We might do that over a few different episodes, but today we want to focus primarily on the RMDs. The age for RMDs of course required minimum distributions was pushed back once again. So if you are getting close to the time we have to start pulling that money out, today's episode will be very helpful for you.

This is from John's radio show, but we wanted to share it here as well because this information is very important for retirement planning here in 2023. Let's talk about the Secure Act. Now the Secure Act is something that's been in place for a while and a lot of people still don't understand that. Now they've come along after discussing in Congress for nearly a year and a half, the Secure Act 2.0. I got to tell you, man, I'm excited. I love it when new legislation comes out because that means new content for the show.

And as some people may or may not be aware, I also crank out these show notes for a few dozen financial advisors around the country that they use on their radio show. So anytime I can get new content like this, it's great. Because some weeks, coming up with enough stuff for all these dudes to talk about for an hour can get to be a little laborious.

But hey man, this is like Christmas for me. I know that, man. But I had to give you credit, folks. For the folks who don't know, I have about 10 of these guys all over the country that I do shows with and John Stillman is the guy who provides a script every week to everybody.

So you do a good job. Well, this is the testing ground right here and then we see how it works and then franchise. It doesn't work on this show.

We know it's probably not going to work there either. Well, let's get back to the SECURE Act 2.0. One thing that changed that I know about and you know a whole lot more about this than I do, the RMD age has been pushed back once again, which, you know, to my way of thinking doesn't make any sense at all for the government to do this because they need tax revenue. But you know, it's good for folks out there who don't need to take those RMDs. Yep.

So, and let's clarify what we're talking about here. So RMDs are required minimum distributions, all that money that you've saved in IRAs or 401ks that you have not paid taxes on. They're going to make you take money out at a certain age because they said enough deferring. We want our tax revenue.

So that's why the RMDs exist. So it used to be age 70 and a half was when you had to start taking money out. Why a half a year?

Nobody knows. So that was the case for years. Like the age hadn't changed for many, many years.

Yeah. And then we had the SECURE Act 1.0, the original, the OG SECURE Act, if you will, that was the beginning of 2020. They passed that January of 2020. And it was in the news for like, you know, a week or two because it was kind of a big deal, the stuff that they passed in there. And then of course the pandemic started and anything about anything else was immediately subsumed in the news cycle. And we never heard about the SECURE Act again.

It got very little notice by most people. Yeah. But what they did in January of 2020 was they changed the RMD age from 70 and a half to 72. Now what they've done is they've pushed it back another year to 73. So it's a little funky because essentially what they did is they said for anybody, now if you were born before 1951, your RMDs have already started, nothing changes for you.

It's kind of grandfathered in there, no pun intended. Yep. And so you were actually right on the verge, right? Because like when you had to start your RMDs, Ron, then they pushed it back the next year, but they pushed it back to the age you are. So you've always been like just at the point where you've had to take them. Anyway.

What are you talking about? I'm just 39. Well, yeah, they made an exception for you and made you take it at 52 instead of 72. So if you were born between 1951 and 1958, your RMD age is now 73.

And if you were born 1959 or later, your RMD age is 75. Wow. So why does this matter? Well, it's a big deal.

I'll give you a specific example of why it's the big deal. So I have some clients who are both husband and wife are 69 now. And the way we have their plan set up is we have them, they get as much income as they need. They're living on about $75,000 a year. They're living in Hilton Head. They travel some, not a ton. Their house is paid for.

So, you know, it works well for them. The $75,000 a year is enough. And we figured out that that's how much we can create for them based on their situation before they pay any taxes.

All right. And so for the last, I think they've been retired three years. So for the last three years, they've paid no taxes.

They've had that $75,000 in income. And we've always had this understanding. In fact, when they started, I was saying, look, you know, we can do this until you're 70 and a half. And then when your RMDs kick in and we have to take more out of the IRA than we need, it's going to force you up into one of those tax brackets. So we're going to play this 0% game as long as we can. Just understand we're not going to be able to do it forever. Well, so then they pushed the age back to 72 and that bought us another couple of years of playing the tax free game with them. Now we get a whole second year. In fact, when the legislation came out, I don't know what this says about me that I got a news alert on my phone, but the secure act 2.0 had been there.

My phone knows what I'm interested in. In fact, I texted them as well as a dozen other clients who I knew this would affect and said, Hey, just so you know, this is what's up. We'll talk about it in more detail later, but this has happened because I told them there was a chance it was probably happening. So in their case down in Hilton Head, now we've got another 69. So we've got four more years where we can do the tax free thing before we have to take this taxable money out that we don't want to take. So with a lot of folks that we work with, the way we have those tax plans set up, this is a really good thing.

So hopefully that all makes sense. And there's a lot of other stuff in the secure act 2.0 that we'll talk about later in the show, but that's the biggest news for most people because if you're 50 years old, this doesn't affect you a whole lot because you didn't really have any plans in place for, you know, your RMDs because it was so far away. And if you're 72 already and you've already had to be taking the RMDs, it doesn't affect you either. But for people that are mid to late sixties to like 71, this is a pretty huge thing.

So if you're in that age bracket and you're not really sure how this affects you or what you need to be doing to plan accordingly, let us know. Let's have a conversation, 15 minute retirement ready phone call. We can just kind of talk through what has changed, how things are, how they are now, legislatively speaking, and help you get an understanding of what you need to be thinking about in your case. So call or text if you'd like to set up that 15 minute retirement ready phone call.

Cost you nothing. If that's all you need is that call, great. We'll get you on the right track. You go on your way, or if you need some help beyond that, we'll figure out how to make that happen for you. Carolina Weldstor's doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.