As 2024 progresses, it’s important to be aware of several updates to the Mandatory Minimum Distribution (RMD) rules, especially as you approach retirement. Whether you’re navigating the new RMD age limit or looking at your philanthropic strategies, these changes could impact your retirement income, taxes and even Medicare costs.
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RMDs now begin at age 73
One of the biggest changes from the SECURE 2.0 Act was increasing the starting age for RMDs. Previously, retirees had to start taking distributions from their traditional IRAs and 401(k) accounts at age 72. Starting in 2024, the RMD age moved to 73, giving account holders another year to tax their money with tax deferral.
If you were born between 1951 and 1959, you should start your RMD at age 73. However, those born in 1960 or later can delay their RMDs until age 75, because the SECURE 2.0 Act pushed the RMD age to 75 by 2033.
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Higher Medicare premiums?
A hidden cost of RMDs is the potential increase in your Medicare premiums. When you start using RMDs, your taxable income increases, which can move you into a higher income bracket. Your Medicare Part B and D premiums may increase if your income exceeds certain thresholds.
Beware of punishments
Missing an RMD can result in significant fines. Previously, the penalty for not withdrawing your full RMD was 50% of the unwithdrawn amount. However, thanks to the SECURE 2.0 Act, the fine has been reduced to 25%. If you correct the error within two years, the fine is reduced to 10%. Even that is a costly mistake, so it’s wise to stay on top of your RMD deadlines.
You can set up automatic recordings to avoid missing an RMD, or mark your calendar in advance to ensure you don’t miss it.
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Opportunities for Charitable Giving
Charitable giving can be a smart option if you want to minimize taxes while meeting your RMD obligations. In 2024, you can make a Qualified Charitable Distribution (QCD) of up to $105,000 from your IRA if you are over age 70 ½. If donated to a qualified charity, this amount will count toward your RMD and will not be taxed as income.
In addition, retirees can donate up to $53,000 to eligible charities through charitable remainder funds or annuities. This can be a great way to meet RMD requirements while supporting a cause you care about.
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Roth 401(k) RMD relief
Another notable change for 2024 is that Roth 401(k)s will no longer be subject to RMDs. Previously, account holders had to convert their Roth 401(k) to a Roth IRA to avoid receiving distributions. Now, Roth 401(k) and Roth IRA holders can skip RMDs and grow their investments tax-free during retirement.
The 2024 RMD rule changes provide new opportunities to manage retirement income, minimize taxes, and plan charitable giving. Consider speaking with a trusted financial advisor to navigate these updates and maximize your retirement strategy.
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This article RMD Rule Updates for 2024: How They’ll Affect Your Retirement Income and Charitable Donations originally appeared on Benzinga.com
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