2024 has brought some new positive changes from the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 which was passed in 2022.
SECURE 2.0 has raised the Required Minimum Distribution (RMD) age and we are excited about the flexibility that brings. In 2024 the age is 73 and by 2033 it will be 75. This gives room for advanced financial planning strategies like Roth Conversions and recognition of deferred income and executive benefits while managing your tax bracket. Let’s revisit your cash flow strategy at your next review meeting to look at this opportunity.
In addition to these age increases, one new benefit in 2024 that might have flown under your radar is the fact that RMDs will no longer apply to your Roth assets within your employer sponsored accounts. We are glad to see this provision go away because it can force financial decisions to exit an employer plan when it, otherwise, may not be in your financial best interest. It was also a requirement that was easily missed in the past and resulted in tax penalties, so it is a very beneficial change.
It is also important to know that 2024 brings opportunities to take a penalty-free hardship withdrawal once per year for up to $1,000 with some payback rules. There is more penalty-free hardship withdrawal flexibility for cases of domestic abuse so if you are in executive management, be in the know for your more vulnerable employees.
Lastly, we want to remind you that there is a SECURE 2.0 provision requiring high earners to fund the catch-up savings option in their employer retirement plans with Roth dollars and implementation has been delayed until 2026. Be aware that it is coming and plan for it.
Key take-aways for 2024
- No more RMDs for Roth 401(k)s and Roth 403(b)s.
- 2024 brings additional hardship withdrawal flexibility.
- RMD starting age is rising so revisit your cash flow strategies.
- Be ready for the 2026 implementation of Roth catch-ups.
Marietta “Ed” Hall, CFP®
Senior Advisor
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https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request. Material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.
