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SECURE Act 2.0 and Required Minimum Distributions

On December 29, 2022, the SECURE Act 2.0 was signed into law. The act updates the rules surrounding retirement savings accounts and will have effects on almost every stage of saving for retirement. This new legislation builds upon the SECURE Act of 2019, that adjusted the rules on saving for retirement and withdrawing money from retirement accounts.

The change that will impact most retirees the year is an adjustment in the age at which an individual must take required minimum distributions (RMD) from their qualified retirement accounts. Prior to the SECURE Act 2.0, RMDs for retirees began the year the individual turned 72. Under the act, RMDs do not start until the retiree reaches age 73 for anyone born between 1951 and 1959. For anyone born after 1960, they will not be required to take RMDs until they turn 75.

Unfortunately, for those who have already started taking required minimum distributions, there will be no change to their status, and they will still be required to take distributions from their IRAs or similar tax-deferred accounts this year.

The table below shows a summary of the details of the new RMD requirements un the SECURE Act 2.0.

For clients who are turning age 72 this year and thought that they must begin taking out RMDs, 2023 provides another year to implement tax planning strategies such as Roth conversions. If this situation applies to you, your HFG Trust advisor will be working to find the most tax efficient plan going forward.

Required minimum distributions are just the tip of the iceberg for all the changes that are included in the SECURE Act 2.0. However, many of the changes that will have an impact on retirees happen in the year 2024 and beyond. We will continue to provide updates for the years in which these changes become applicable.

If you have any questions or would like to discuss what impacts the SECURE Act 2.0 will have on your retirement plan, please do not hesitate to reach out.

Brent Schafer, CFP®

Financial Advisor

LEGAL INFORMATION & DISCLOSURES

This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Community First Bank, HFG Trust, and HFG Advisors have no duty or obligation to update the information contained herein. Further, Community First Bank, HFG Trust, and HFG Advisors make no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services, banking services, or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Community First Bank, HFG Trust, and HFG Advisors believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be copied, reproduced, republished, or posted in any form without the prior written consent of Community First Bank and/or HFG Trust and/or HFG Advisors. HFG Advisors, Inc, is a wholly owned subsidiary of HFG Trust, LLC. HFG Trust, LLC is a Washington state-registered Trust company and wholly owned subsidiary of Community First Bank.