The IRS has announced a delay until 2026 in closing a loophole affecting the age rules for 401(k) withdrawals. This regulation allowed workers to keep money invested in their workplace retirement plans for a longer period. Tax regulators had previously issued new regulations in July as part of the SECURE 2.0 Act.
The act aimed to increase the required minimum distribution (RMD) age to 75 by 2033. A specific supporting regulation, which was set to apply to workers born in 1959, has now been delayed. This regulation would have required these workers to start their RMDs at age 73.
For most workers, the revised rules would mean those born before 1959 must start taking funds out of their 401(k)s at age 72.
Irs delays retirement withdrawal changes
Employees born on or after January 1, 1960, would need to begin distributions at age 75.
The delay is intended to give retirees more time to accrue savings in tax-deferred accounts like 401(k)s, 403(b)s, and individual retirement accounts. Currently, retirees must begin drawing down their accounts once they reach age 70½. The new implementation date for the increased RMD ages will take effect in the coming years.
The proposed rules, which are now delayed, also provide clarifications regarding post-tax Roth accounts. These clarifications state that distributions from designated Roth accounts cannot be used to satisfy RMD requirements, but they are eligible for rollover distributions. Additionally, the rules set a fair market valuation date for determining the portion of an annuity subject to RMDs among other technical guidelines.
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