RMD Relief and Guidance for 2023-Featuring Darren Oglesby

RMD Relief and Guidance for 2023-Featuring Darren Oglesby

In early 2022, the IRS issued proposed regulations regarding required minimum distributions (RMDs) to reflect changes made by the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. According to Darren Oglesby, the esteemed Monroe, LA financial advisor, these changes have significant implications for IRA owners and employees looking to optimize their retirement planning.

Relief with respect to change in RMD age to 73

The IRS has been diligent in addressing the recent changes made by the SECURE 2.0 Act of 2022, passed in late 2022. While final RMD regulations are yet to be released, the IRS has provided interim relief and guidance for 2023, ensuring individuals have some clarity amidst the evolving regulations.

One of the key changes brought about by the SECURE 2.0 Act is the increase in the general RMD age from 72 to 73 for individuals reaching age 72 after 2022. This means that some individuals who reached age 72 in 2023 may have mistakenly taken distributions for 2023, overlooking the change in RMD age to 73. Darren Oglesby advises that such individuals need not worry, as the IRS is offering relief.

The relief comes in the form of an extension to the deadline for the 60-day rollover period for certain distributions until September 30, 2023. As explained by Darren Oglesby, this extension applies to distributions made between January 1, 2023, and July 31, 2023, to an IRA owner or employee (or the IRA owner’s surviving spouse) born in 1951, if the distributions would have been RMDs had it not been for the change in the RMD age to 73. This extension offers some breathing room for those who may have taken distributions prematurely.

It’s important to note, as Darren Oglesby highlights, that generally, only one rollover is permitted from a particular IRA within a 12-month period. However, this special rollover allowed under the relief is an exception, even if the individual has rolled over a distribution in the last 12 months. Nevertheless, taking advantage of this relief will prevent the IRA owner or surviving spouse from rolling over a distribution in the next 12 months. However, direct trustee-to-trustee transfers remain unaffected by this rule.

Inherited IRAs and retirement plans

Another crucial aspect of RMD changes relates to inherited IRAs and retirement plans. Before 2020, RMDs for such accounts could typically be spread over the life expectancy of a designated beneficiary. However, the SECURE Act changed this rule, requiring the entire account to be distributed within 10 years after the death of the IRA owner or employee, with some exceptions for eligible designated beneficiaries.

According to Darren Oglesby, an eligible designated beneficiary includes a spouse or minor child of the IRA owner or employee, a disabled or chronically ill individual, and an individual no more than 10 years younger than the IRA owner or employee. The rules also require that the entire account be distributed 10 years after a minor child reaches the age of majority.

The proposed regulations issued in early 2022 sparked concerns among beneficiaries as they suggested that annual distributions are required during the first nine years of such 10-year periods in most cases. This led to many individuals missing their RMDs, potentially incurring a hefty 25% penalty tax.

To address these concerns, the IRS has announced that it will not impose the penalty tax in certain circumstances. As noted by Darren Oglesby, relief may be available if the IRA owner or employee died in 2020, 2021, or 2022, and on or after their required beginning date, the designated beneficiary who is not an eligible designated beneficiary did not take annual distributions for 2021, 2022, or 2023 as required during the 10-year period following the IRA owner’s or employee’s death. Similarly, relief might be available if an eligible designated beneficiary died in 2020, 2021, or 2022, and annual distributions were not taken in 2021, 2022, or 2023 as required during the 10-year period following the eligible designated beneficiary’s death.

Navigating the complexities of RMDs can be challenging, especially with the evolving regulations. As a seasoned financial advisor in Monroe, LA, Darren Oglesby suggests that individuals seek professional advice to optimize their retirement planning and ensure compliance with the latest IRS guidance.

About Oglesby Financial

About Oglesby Financial Group: Oglesby Financial Group is a Monroe financial services firm dedicated to providing comprehensive investment management and wealth advisory solutions to individuals, families, and businesses. With a commitment to delivering personalized strategies tailored to each client’s unique financial goals, Oglesby Financial Group combines industry expertise with innovative technology to optimize outcomes in an ever-changing market.