The SECURE Act 2.0: How New RMD Rules Affect Your Retirement

Required Minimum Distributions (RMDs) force you to withdraw money from retirement accounts—whether you need it or not—and pay taxes on every dollar.

The SECURE Act 2.0, passed in December 2022, changed these rules significantly. Some changes help. Others create new planning challenges.

Here's what you need to know and how to adapt your strategy.

The Big Changes: RMD Age Increases

The age at which RMDs begin has been pushed back:

Birth Year	RMD Starting Age	First RMD Due
1950 or earlier	72	Already started
1951-1959	73	By April 1 of year after turning 73
1960 or later	75	By April 1 of year after turning 75

What this means:

If you were born in 1960, you now have until age 75 to begin RMDs—three additional years of tax-deferred growth compared to previous rules.

Example impact:

Scenario	RMD at 72	RMD at 75
IRA Balance	$1,000,000	$1,225,000*
First RMD	$39,063	$44,643
Taxes (24% bracket)	$9,375	$10,714

*Assuming 7% annual growth

The delay allows more growth, but your eventual RMDs will be larger.

Reduced Penalties for Missed RMDs

Previously, missing an RMD triggered a brutal 50% penalty on the amount not withdrawn.

SECURE Act 2.0 changes:

Situation	Old Penalty	New Penalty
Missed RMD	50%	25%
Corrected within 2 years	50%	10%

Planning note: While the reduced penalty is welcome, it's still significant. Missing a $50,000 RMD would cost you $12,500 (25%) or $5,000 if corrected quickly (10%).

Roth 401(k) RMDs Eliminated

Before SECURE Act 2.0: Roth 401(k)s required RMDs, even though the distributions were tax-free. This forced unnecessary withdrawals and reduced the account's ability to grow.

After SECURE Act 2.0: Roth 401(k)s are no longer subject to RMDs starting in 2024.

Why this matters:

You no longer need to roll Roth 401(k) funds to a Roth IRA just to avoid RMDs. The money can stay in the employer plan indefinitely.

Planning opportunity: If your 401(k) offers a Roth option with strong investment choices, it's now more attractive for accumulation without the RMD hassle.

New Catch-Up Contribution Rules

SECURE Act 2.0 expanded catch-up contributions for workers aged 60-63:

Age	2025 Catch-Up Limit
50-59	$7,500
60-63	$11,250
64+	$7,500

The Roth catch-up requirement:

Starting in 2026, workers earning over $145,000 must make catch-up contributions on a Roth basis only—no pre-tax option.

Planning implication: If you're a high earner approaching 60, maximize catch-up contributions in 2025 while you can still choose pre-tax. After 2026, the choice is made for you.

Inherited IRA Rules: The 10-Year Squeeze

SECURE Act 2.0 clarified (and complicated) rules for inherited IRAs:

For Most Non-Spouse Beneficiaries

The 10-Year Rule: You must empty the inherited IRA within 10 years of the original owner's death.

The RMD requirement: If the original owner had started RMDs, you must take annual distributions during the 10-year period.

Example:

Parent dies at 77 (past RMD age) with $1,000,000 IRA. Child inherits.

Year	RMD Requirement	Remaining Balance*
1	~$37,000	$1,030,700
2	~$39,000	$1,060,049
...	...	...
10	Empty account	$0

*Assuming 7% growth, RMDs based on life expectancy

The tax problem: Large inherited IRAs can push beneficiaries into higher tax brackets for a decade.

Exceptions to the 10-Year Rule

Certain "eligible designated beneficiaries" can still stretch distributions:

1. Surviving spouse
2. Minor children (until age 21)
3. Disabled individuals
4. Chronically ill individuals
5. Beneficiaries not more than 10 years younger than the deceased

RMD Strategies for 2025 and Beyond

Strategy 1: Roth Conversions Before RMDs Begin

Convert traditional IRA assets to Roth during lower-income years (age 60-72/75).

Why it works:

• Pay taxes at potentially lower rates before RMDs start
• Roth IRAs have no RMDs
• Reduces future taxable income

Example:

Without Conversions	With Conversions
$2M IRA at 75	$1M IRA + $1M Roth at 75
RMD: ~$73,000	RMD: ~$36,500
Taxable: $73,000	Taxable: $36,500

Potential savings: Thousands annually in taxes, plus the Roth continues growing tax-free.

Learn more about Roth conversion strategies →

Strategy 2: Qualified Charitable Distributions (QCDs)

If you're 70½ or older and charitably inclined, QCDs offer powerful benefits:

How it works:

• Transfer up to $105,000 (2024 limit) directly from IRA to charity
• Counts toward your RMD
• Excludes the amount from taxable income
• Doesn't require itemizing deductions

Example:

Regular RMD	With QCD
RMD: $50,000	RMD: $50,000
Charitable gift: $20,000 (separate)	QCD: $20,000
Taxable income: $50,000	Taxable income: $30,000
Deduction: $20,000 (if itemizing)	No deduction needed

Best for: Those who would donate anyway and whose charitable giving exceeds the standard deduction.

Strategy 3: Aggregate and Optimize

If you have multiple retirement accounts, you can:

For IRAs: Calculate total RMD, but take it from any IRA(s)

Strategy: Keep high-growth investments in accounts you won't touch for RMDs. Take RMDs from more conservative allocations.

Example:

• IRA #1: $500,000 in growth stocks
• IRA #2: $500,000 in bonds
• Total RMD: $36,500

Take the entire RMD from IRA #2, letting IRA #1 continue growing.

Strategy 4: Qualified Longevity Annuity Contract (QLAC)

QLACs allow you to defer RMDs on a portion of your retirement accounts:

How it works:

• Purchase a QLAC within your IRA or 401(k)
• Up to $200,000 can be excluded from RMD calculations
• Payments begin at a future age (up to 85)

Example:

Without QLAC	With QLAC
IRA: $1,000,000	IRA: $800,000 + QLAC: $200,000
RMD base: $1,000,000	RMD base: $800,000
RMD: $36,500	RMD: $29,200

Tradeoff: Lower RMDs now, but you lose access to the QLAC funds until payments begin.

The RMD-Free Alternative: Section 7702

While these strategies minimize RMDs, they don't eliminate them. If you want retirement income with no RMDs at all, consider Section 7702 life insurance strategies.

How it works:

Cash value life insurance grows tax-deferred and can be accessed through policy loans—which aren't considered income for tax purposes.

Key differences from IRAs:

Feature	Traditional IRA	Section 7702
Contribution limits	$7,000 + catch-up	No limits
RMDs at 73/75	Yes	No
Withdrawals taxed	Yes	No (via loans)
Death benefit	Taxable to heirs	Tax-free
Affects SS taxation	Yes	No

For high earners who've maxed retirement accounts, Section 7702 provides a complementary strategy with none of the RMD headaches.

Learn more about Section 7702 →

Planning by Age

Age 50-59

• Maximize 401(k) contributions ($23,500 + $7,500 catch-up)
• Begin Roth conversion analysis
• Consider IUL for RMD-free supplemental income

Age 60-63

• Take advantage of super catch-up contributions ($11,250)
• Accelerate Roth conversions if in lower brackets
• Model RMD projections at 73/75

Age 64-72

• Final years for aggressive Roth conversions
• Ensure Roth 5-year rule satisfied
• Position accounts for optimal RMD sourcing

Age 73/75+

• Implement QCD strategy if charitably inclined
• Coordinate RMDs with Social Security taxation
• Use tax-free sources (Roth, 7702) to manage brackets

Common RMD Mistakes to Avoid

1. Missing first RMD deadline (April 1 following year you turn 73/75—but this means two RMDs in one year)

2. Not aggregating IRAs properly (calculate total, but can withdraw from any)

3. Forgetting inherited IRA rules (different requirements based on beneficiary type)

4. Ignoring 401(k) from current employer (still working? You may be able to delay that plan's RMD)

5. Taking RMD before Roth conversion (must satisfy RMD first; can't convert the RMD amount)

Action Steps for 2025

• Verify your RMD starting age based on birth year
• Calculate projected RMDs at 73/75
• Model Roth conversion opportunities before RMDs begin
• Review beneficiary designations on all accounts
• Consider QLAC if appropriate for your situation
• Explore Section 7702 for RMD-free supplemental income

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This article will be updated as IRS guidance and regulations evolve. Last updated: December 8, 2025

Related reading:

• Roth Conversion Strategies
• Section 7702 Explained
• Tax-Free Retirement Income