Weekend Reading: Congress Says You Can Delay IRA Distributions, But it’s a Tax Trap

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Weekend reading secure act 2 0 rmd delay tax trap Weekend reading secure act 2 0 rmd delay tax trap
Weekend Reading

When SECURE Act 2.0 was passed in December 2022, one provision delayed the starting age for required minimum distributions (RMDs) to age 73; however, the changes didn’t affect those who were already taking RMDs before 2023. It also further increased the starting age to 75, effective from January 2033.


Proceed with caution: While the law allows for delayed RMDs, it may not be in your best interest. Leaving assets in a traditional IRA or 401(k) for as long as possible carries risks. Distributions from these accounts are taxed as ordinary income, potentially subjecting you to higher tax rates. Additionally, income tax rates may increase, and certain tax provisions, such as Social Security benefit inclusion and Medicare premium surtax, can impact your overall tax burden.

Estate planning pitfalls: Moreover, delaying distributions can create tax issues for your beneficiaries who inherit traditional IRAs and 401(k)s. Beneficiaries must pay income taxes on distributions, and the SECURE Act's elimination of the Stretch IRA means most beneficiaries must distribute the entire IRA within 10 years.

You have more control over your income taxes than you might realize. Before you decide to delay your RMDs, be sure to consider your – plus your heirs’ – income tax and overall financial situation.