April 2022 – Contributed by Vantage Financial
As of March 30, 2022, the Senate has begun to review the Securing a Strong Retirement Act of 2022, which calls for multiple improvements revolving around saving for retirement. The draft as of now calls for increases in catch up provisions in retirement accounts based off costs of living, increases based off inflation for qualified charitable distributions, reducing the excise tax imposed on those who miss their required minimum distributions, delaying the starting age for required minimum distributions, and other benefits pertaining to employer-sponsored retirement plans.
In the SECURE Act, the required beginning date was set to move from age 70 ½ to 72. Should this new act pass, the new required beginning date for distributions from tax-deferred retirement accounts will increase next year to 73, with the end goal of starting at age 75 in 2033. This additional increase in age will allow individuals to either continue saving in their tax deferred accounts, allow for Roth conversions to continue into the later years of one’s retirement, or provide more time to distribute from tax deferred accounts using qualified charitable distributions, which is set to begin increasing from the $100,000 maximum based off inflation. Along with these increases, the penalty for missing required minimum distributions would drop down from 50% of the funds that were not distributed, down to 25%. Should the individual attempt to correct this missed distribution in a timely manner, that penalty would drop down even further to only 10% of the remaining distribution.
The IRS has also posted guidance on how to handle inherited IRAs, as any individual who would inherit an IRA that would not be the spouse to the original must continue to take the required minimum distributions if the owner passed away on or after their required beginning date for the first 9 years, while fully liquidating the account in the 10th year. If the original owner passed prior to starting their required minimum distributions, you will not need to take the required minimum distributions, but the account will still need to be liquidated after the 10th year of ownership.
While the Securing a Strong Retirement Act of 2022 is still in early talks, this act has seen strong support from both sides, and is projected to be passed by the end of the year. Should this act be successfully passed, your wealth advisor will be a great resource to help you understand how you might be impacted given the recent changes, and what steps you would need to take to maximize the potential benefits this act may have for you.
This material is for informational purposes only. It is not a recommendation or solicitation to buy or sell any securities. Vantage Financial is not a tax advisor; please consult your tax advisor prior to making any investment decisions. Vantage Financial is an Investment Advisory Firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply any particular level of skill or expertise.