In 2024, retirees and those inheriting IRAs will face new rules regarding Required Minimum Distributions (RMDs). The SECURE 2.0 Act of 2022 mandates that non-spouse beneficiaries of IRAs inherited after 2020 continue making annual RMDs and deplete the account within ten years. This rule has some exceptions for disabled beneficiaries, but the IRS is providing relief to taxpayers who inherited an IRA between 2020 and 2024, allowing them to choose not to distribute this year.
Another significant change in 2024 is that RMDs will no longer apply to Roth 401(k)s. Previously, RMDs were not required for Roth IRAs, but now they can be rolled over into a Roth 401(k), eliminating the need for RMDs. This change may create new challenges because of the five-year rule, which requires funds in a Roth IRA to be open for at least five years before tax-free withdrawals can be made.
Lastly, seniors with significant IRA balances have the option to lower their RMDs by up to $105,000 per year through Qualified Charitable Distributions (QCDs). This amount exceeds the previous $100,000 cap, and married couples can donate up to $210,000 from their IRAs. QCDs are fully tax-free and count toward the required minimum distributions, allowing seniors to deduct charitable contributions from their taxes and potentially save even more money on their tax payments.
