The legislation known as SECURE 2.0 is the gift that keeps on giving for retirement planning.  While the first parts of SECURE 2.0 went into effect in 2021, there will be changes every year through 2027, and then the big change in 2033 when the age for Required Minimum Distributions increases to 75.

Understanding the Implementation Process

In July 2024 the IRS released its final regulations for the 2020 SECURE Act and proposed regulations for SECURE 2.0. This regulatory process highlights an important point about retirement legislation: there's often a gap between when Congress passes a law and when we know exactly how it will work in practice. The IRS and Department of Labor must review the legislation, write implementation rules, gather public feedback, and then issue final regulations.

This implementation process has created some challenges. When Congress required immediate changes without giving agencies adequate time to develop guidelines, it led to some uncertainty. For example, the IRS suspended penalties for missed distributions from inherited IRAs from 2021 through 2024. However, they've made it clear that these penalties are in effect in 2025.

I'm going to list here the final result of the 2020 rules and the proposed 2022 rules and invite you to click here to read more of an explanation of what these rules mean for you.

• RMDs in the 10 year period – the “At Least As Rapidly Rule” – RETAINED
• Eligible Designated Beneficiaries (EDBs) – EXPANDED
• Year-of-Death RMD – DEADLINE EXTENDED
• Monitoring Concurrent RMDs – ELIMINATED
• Hypothetical RMD rule for Spouse Beneficiaries – RETAINED
• Trusts as Beneficiary – RULES LOOSENED
• New Rules for Spouse Beneficiaries – CLARIFIED
• First RMD for those born in 1959 – CLARIFIED

Understanding the "At Least As Rapidly Rule"

The "At Least As Rapidly Rule" caught many financial advisors by surprise when it appeared in the SECURE 2020 proposed rules, and it will impact many IRA inheritors. Most IRA beneficiaries other than the deceased IRA owner’s spouse must now withdraw all funds from inherited IRAs within ten years of the original owner's death, which accelerates tax payments. Initially, the legislation didn't specify whether withdrawals were required during this ten-year period. However, the IRS's final rules now require annual distributions in certain cases.

A Special Note About Eligible Designated Beneficiaries (EDBs)

There's one more important detail to understand: Eligible Designated Beneficiaries (EDBs) can still use the Stretch IRA option. However, if an EDB's status changes to a Non-Eligible Designated Beneficiary (NEDB), making them subject to the ten-year rule, they must continue taking annual distributions since they were already required to take them as an EDB.

I know these are a bit confusing – here's a link for some resources to understand some of the rules– and of course you can always consult a Certified Financial Planner® professional, especially one who is also a member of Ed Slott’s Master Elite IRA Advisor GroupSM for help.

Now, let’s review some of the changes that have gone into effect since 2023:

• RMD age raised to 73 (QCDs still available at age 70 ½)
• Qualified Longevity Annuity Contract (QLAC) rules modified, eliminating the 25% limit and increasing the maximum contribution to $200,000 (indexed for inflation)
• Penalties for missed RMDs reduced to 25%, and down to 10% if corrected “timely”
• IRA annuity aggregation with other IRA assets for RMDs
• Added a one-time $50,000 QCD (indexed) to a CRUT, CRAT, or charitable gift annuity
• Expanded Age 50 exceptions to include private sector firefighters and state and local government corrections workers
• Added statute of limitations for missed RMDs and excess contributions
• Added exceptions to the 10% penalty rule – some are applicable to IRAs only, some to Qualified Plans only, and some to both (see link below for more details)
• Special Needs Trusts may have a charity as a remainder beneficiary
• Roth allowed for SIMPLE and SEP Plans
• Roth employer contributions allowed (both match and nonelective)
• IRA catch-up contributions are indexed for inflation
• Employers may make matching plan contributions on student loan payments
• 529 funds may be rolled over into a Roth IRA (subject to annual contribution and lifetime limits)
• No RMDs on Roth in Qualified Plans
• Higher catch-up limits for workers aged 60 – 63 for Qualified Plans and SIMPLEs

Future Changes to Watch

As we look ahead, more changes are coming:

2026

• Catch-up contributions for workers earning more than $145,000 (indexed) must be Roth
• ABLE program age requirement for onset of disability raised from 26 to 46
• More exceptions to 10% penalty for early withdrawals

Planning for Your Financial Independence

To help you stay on track with your financial goals, consider thinking about these annually:

• Life Events – have any of these occurred for you and/or your family in 2024?
• Birth, death, marriage, divorce, remarriage, illness, job change or retirement
• Began collecting Social Security benefits
• Received an inheritance or substantial financial gift, created a trust, changed your residence
• Change of IRA or plan custodian, Roth conversion
• Conversations to have with your beneficiaries
• Rules for RMDs for IRA owners and beneficiaries, including the importance of properly titling inherited IRAs
• Additional tax benefits available to beneficiaries, including net unrealized appreciation (NUA) and income in respect of decedent (IRD) deduction
• Have you hit any milestone ages?
• Have you taken advantage of all of your IRA and plan related opportunities and met all of your requirements?

Getting Additional Support

This overview doesn't cover every change in the SECURE Act and SECURE 2.0, nor is the checklist exhaustive. If you'd like personalized guidance, I invite you to schedule a 30-minute introductory call with me to discuss how these changes affect your specific situation and how I can help you navigate them.