RMD Age Increased to Age 72

Retirement News

February 7, 2020

Prior to the SECURE Act, taxpayers were generally required to begin receiving RMDs from their traditional IRAs and certain qualified retirement plans beginning on April 1 of the year following the year they reached age 70 ½.^[1] The SECURE Act increased this RMD age to age 72 for all distributions required to be made after December 31, 2019. That is, individuals who attain age 70 ½ after December 31, 2019, will not be required to take mandatory distributions until April 1 of the year following the year in which they attain age 72

Insights

• Generally, there is no RMD requirement for a Roth IRA during the Roth IRA owner’s lifetime. Unlike contributions to a traditional IRA which are made with pre-tax dollars, contributions to a Roth IRA are made with after-tax dollars. As such, the RMD requirement of traditional IRAs ensure that a taxpayer may not indefinitely defer tax on assets held in a traditional IRA.
• The House Ways and Means Committee estimates that this change will cost $8.9 billion over the next 10 years. That’s more than half of the nearly $16.3 billion total the SECURE Act is estimated to cost over the next 10 years.

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[1] Taxpayers may defer withdrawals from a qualified plan until retirement from the company sponsoring the plan, provided the taxpayer is not a 5% or greater owner of the company.