Congress a couple of years ago passed the SECURE Act which changed the required minimum distribution (RMD) date from age 70 1/2 to age 72.
Last week the House passed “SECURE 2" which would increase the RMD age to 73 starting in 2023, then age 74 in 2030 and finally age 75 in 2033. This allows taxpayers additional time for the tax-deferred compounding of IRAs and other retirement accounts. However, as they reach these later ages, larger distributions will be required which may be subject to a higher tax bracket or increase your Medicare premiums.
Other provisions of note in the Act are as follows:
- Expand the age 50 extra catch-up contribution limits. The current limit is $6,500 indexed for inflation. The Act would keep it for age 50 taxpayers but expand it to $10,000 for those age 62-64 beginning in 2023.
- However, catch-up contributions to a qualified retirement plan would now be considered ROTH contributions. This prevents a current deduction but earnings would be tax-free.
- Plan sponsors could also allow matching contributions to be considered ROTH contributions but with any of these contributions being considered additional compensation to the employee.
- Allow employers to pay student loan payments as an employer match.
- Create a national database to find lost retirement accounts.
- Eliminate certain barriers to offering lifetime income annuities as a retirement plan investment options.
There are other provisions but these are the key ones for farmers.
We will keep you posted.
