Required minimum distributions, or RMDs, are legally mandated minimum withdrawals that retirement account holders must make annually from specific tax-advantaged accounts such as traditional IRAs and 401(k) plans. The Internal Revenue Service (IRS) enforces these rules to guarantee that income taxes are eventually collected on both the original tax-deferred contributions and any investment earnings that have grown without taxation during the accumulation phase.
The framework governing RMDs is subject to modifications driven by legislative acts. Notably, two key statutes—the Secure 1.0 Act enacted in 2019 and the Secure 2.0 Act passed in 2022—have introduced pivotal updates modifying when RMDs begin, who they affect, and the consequences of non-compliance. Understanding these modifications is crucial for retirees and beneficiaries with tax-deferred retirement assets.
Increasing the Age to Commence RMDs
One significant change brought by these laws is the incremental increase in the age at which retirement plan owners must start taking RMDs. This age depends on the account holder's birth date and has evolved over time. According to IRS guidelines:
| Birth Date | Age for RMD Commencement |
|---|---|
| Before July 1, 1949 | 70½ |
| July 1, 1949 to December 31, 1950 | 72 |
| January 1, 1951 to December 31, 1959 | 73 |
| After December 31, 1959 | 75 |
These rules apply uniformly to traditional 401(k)s, traditional IRAs including SEP and SIMPLE IRAs. Individuals are required to withdraw their RMDs by December 31 annually, with an exception for the first RMD that can be postponed until April 1 of the year following reaching the required age. However, subsequent RMDs must be withdrawn by December 31 each year to remain compliant.
For example, an individual turning 73 in 2026 with a traditional IRA must take their initial RMD by April 1, 2027, but the second distribution cannot be delayed beyond December 31, 2027.
Roth 401(k) Plans Now Exempt from Lifetime RMDs
The Secure 2.0 Act addressed a discrepancy that previously subjected Roth 401(k) plans to RMD rules during the original account holder's lifetime, unlike Roth IRAs which do not require distributions while the owner is alive. Under the new law, Roth 401(k) accounts are also exempt from RMDs during the original owner's lifetime.
However, once the original account holder passes away and the account is inherited, RMD provisions apply to both Roth 401(k)s and Roth IRAs. Spousal beneficiaries have specific options if the deceased died before required RMDs began: they may either maintain the inherited account and defer distributions until the original RMD age or roll the assets into their own retirement account, which lets them delay distributions until they individually reach the required age.
Nonspousal beneficiaries face stricter requirements, especially if they are at least 10 years younger than the original owner. These beneficiaries generally must follow the “10-year rule,” which mandates liquidation of the inherited retirement account within 10 years following the original owner's death. Prior to the Secure 1.0 Act, some nonspousal beneficiaries could calculate RMDs based on their own life expectancy, but this option is no longer available unless the original owner died before 2020.
Reduction of Penalties for Missing Timely RMDs
Another critical update under the Secure 2.0 Act concerns the excise tax penalties imposed by the IRS when retirees fail to comply with RMD deadlines. Previously, the IRS could levy a steep penalty reaching 50% of the amount that should have been withdrawn. The updated legislation reduces this penalty to 25% initially, with a further reduction to 10% if the distribution shortfall is corrected within two years.
To formally address any missed RMD, affected individuals must file IRS Form 5329 alongside their federal tax return. Additionally, the penalty may be entirely waived if the individual remedies the situation promptly and includes a statement explaining the shortfall was due to a reasonable error.
Conclusion
The statutory updates enacted through the Secure 1.0 and Secure 2.0 Acts introduce substantive changes to RMD regulations that retirees and beneficiaries need to internalize. These modifications affect the timing and scope of required withdrawals and offer some relief in penalty enforcement, reflecting ongoing adjustments by legislators to balance tax compliance with retiree flexibility.