RMDs required for many IRA beneficiaries this year
SIMPLICITY, PLANNING, ATTITUDE CAN ALL HELP YOU REACH YOUR GOALS
The SECURE Act went into effect Jan. 1, 2020. If you inherited an IRA after that date, you have not been required to take required minimum distributions, or RMDs. In 2024, however, RMDs are required for many beneficiaries. Some beneficiaries, such as surviving spouses, are categorized as eligible designated beneficiaries, or EDBs. If you are a designated beneficiary, but not an EDB, and you inherited a traditional IRA, then whether you must take RMDs in 2024 is based on whether the deceased owner of the IRA had reached his/her required beginning date, or RBD, which is when retirement savers must begin taking RMDs from their 401(k) or IRA. If the owner had reached the RBD, then you are required to take RMDs based on your single life expectancy table, which is contained in IRS publication 590-B.
You do not have to take RMDs for previous years, but you should base your RMD as if you had been taking RMDs in prior years. For example, if your life expectancy was 20 years two years ago when you would have taken your first RMD, you would subtract 2 from 20, and use 18 as your life expectancy for your 2024 filing.
If the deceased owner of the IRA had not reached his/her RBD, then you are not required to take an RMD in 2024. However, you are required to liquidate the IRA by the end of the 10th year after the death of the IRA owner. The 10-year rule is applicable to beneficiaries after Jan. 1, 2020.
If you inherited a Roth IRA, and you are a non-EDB, no RMD is required in 2024. However, the 10-year rule detailed above is applicable.
If you are a surviving spouse, you are allowed to use the “stretch” option over your lifetime, and the 10-year rule is not applicable, unless you elect to use it.
The SECURE 2.0 Act, enacted at the end of 2022, changed many of the rules affecting IRAs. The following are significant ones, according to IRA expert Ed Slott.
l RMD starting age changed from 72 to 73; in 2033 the starting age is 75.
l RMDs are no longer required from designated Roth accounts in employersponsored retirement plans.
l When IRA owners die before RBD, the surviving spouse can choose to be treated as if she/he were the age of the deceased spouse.
l A trust established for a disabled or chronically ill individual can use a life expectancy “stretch” even if a charity is named as the remainder beneficiary.
l The maximum qualified longevity annuity contract, or QLAC, premium increased from $125,000 to $200,000, and would be adjusted in the future based on inflation changes.
l Any IRA overage payment can be used to satisfy RMDs from other IRAs.
l The penalty for inadequate RMDs decreased from 50% to 25% — or 10% if timed correctly.
l For RMD shortfalls and excess contribution penalties, the statute of limitations begins when the taxpayer files a Form 1040 tax return for the relevant year.
l There were new exceptions established related to the 10% excise tax on early distributions. Some examples were for federally established natural disasters up to $22,000; another example was uncapped distributions associated with terminal illness.
l A qualified charitable contribution, or QCD, can be used to fund a charitable gift annuity; for 2024 the upper limit is $53,000.
If you are required to take RMDs in 2024, you should consider making distributions throughout 2024 rather than waiting until year’s end. This way, you can avoid the possibility of extreme market conditions either at the beginning or end of the year.
Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.
If you’re like the overwhelming majority of people, the resolution you make on Jan. 1 is a distant memory by mid-February. It’s natural to get excited about making changes in a new year, but consistently doing the work isn’t always something to get you pumped up.
“January 1 is an arbitrary date to make choices,” says Jim Kwik, author of “Limitless Expanded Edition: Upgrade Your Brain, Learn Anything Faster, and Unlock Your Exceptional Life.” “Most people stop after a couple of weeks. Resolutions are often expressed interests and not real commitments. A resolution should be a decision. Decision, like the word ‘incision,’ means to cut off from any other possibility. It’s making a commitment.”
Michelle Rozen, author of the forthcoming book “The 6% Club,” has been working with Fortune 100 companies for more than a decade, coaching leaders on issues related to motivation. Over the years, she noticed that people have a desire to change, but when it’s time to execute, many fall short.
“I surveyed 1,000 people at the beginning of the year and all of them said, ‘I’m going to have an amazing year. I’m going to do so much better in business. I’m going to do so much better in life,’ ” she says. “I surveyed them from January to June, and 94% of those people dropped whatever they pledged they were going to do by February.”
People who are able to stick to their resolutions share some commonalities, say both Kwik and Rozen.
THEY CHOOSE ONE THING
Instead of overwhelming themselves with too many goals, successful resolution-setters stick to doing one thing differently, says Rozen.
“It’s easy to get excited and underestimate how challenging it is for your brain to start something new,” she says. “It takes about 30 days to build a new habit. Pick one thing and focus on that for 30 days. After 30 days, it becomes a part of who you are and how you do things.”
THEY ARE SPECIFIC
People who stick to their resolutions set goals in a granular and specific way, says Rozen.
“When you say, ‘I’m going to increase my sales,’ or ‘I’ll be more present as a leader,’ it’s too broad,” she says. “The more specific you are in how you set your goals, the more successful you will be.”
For example, instead of being more present with your team, set a goal to walk the sales floor an hour a day. Instead of saying you’ll increase your sales, set a goal to make 10 outreach calls each day before lunch.
THEY SET MILESTONES
Another secret of people who stick to New Year’s resolutions is that they take large goals and break them down into manageable milestones.
“Large goals can be very overwhelming, and a confused mind doesn’t do anything,” explains Kwik. “Break things down into smaller manageable tasks and habits. For example, if your goal is to be fit, start with a habit of just 10 minutes of exercise a day.”
Small steps may seem inconsequential. However, Kwik says people overestimate what they can do in a day and underestimate what they could do in a year — if they’re consistent.
“Consistency compounds,” he says. “If people just improved one area of their life or business by 1% daily, compounded over 365 days, it would yield a 37 times increase that year.”
THEY CREATE A HABIT LOOP
To stick, resolutions need to fit into a habit loop, says Kwik. This includes a cue, a routine, and a reward. For example, the cue could be to put your running shoes near your bed. This will trigger you to follow through with the routine, which might be going for a jog first thing in the morning. Then reward yourself with something, such as having a healthy smoothie after you return.
“When you make a resolution, repeating the new habit will rewire your brain to make this action your default,” says Kwik.
Celebrating the wins is key, and Kwik says this is a step that most people skip. “People are very easy to beat themselves up when they don’t do something,” he says. “Recognizing and celebrating your progress, no matter how small, releases dopamine, a neurotransmitter that creates a sense of pleasure. That reinforces the habit and increases the likelihood that you’re going to follow through in the future.”
THEY TAP INTO PURPOSE
To stick to a resolution, you not only need to know what you want to change, but you need a clear understanding of why the results matter. Kwik calls success “H-cubed.”
“We do things emotionally,” he says. “Understanding your ‘why’ behind your goals can significantly boost your motivation and your commitment to stick with that goal or resolution.”
THEY HAVE THE RIGHT ACCOUNTABILITY
Sharing your resolution with someone who could hold you accountable can help you stick to your goal. However, how you put it out into the world matters, says Kwik. For example, if you post on social media that your resolution is to write a book, you may get a lot of positive feedback and comments, congratulating you on the plan.
“Then people get that dopamine reward right away without having to actually write the book,” says Kwik.
Instead, get social support from a small group of peers or a mentor you respect — people whose opinion matters to you. Accountability from the right person can be a very powerful motivator to keep you consistent and keep you on track.
THEY BELIEVE IN THEMSELVES
People who are successful at sticking to their goals tend to have an optimistic outlook on life, which helps them achieve their resolutions year after year, says Rozen.
“Confidence breeds success; it’s a cycle,” she says. “People who are among the 6% that say that they’ll do something and actually follow through are more confident and better able to achieve their next goal.”
Sticking to resolutions gives you a sense of accomplishment and a sense of purpose, both of which will make you happier, says Rozen.
“Knowing how to pick your resolutions and make a plan to crush them can have an accumulating effect on businesses and life that is incredible,” she says. “Whatever obstacles get in the way are not going to discourage you because you have mental clarity. You know where you are going, and you’re clear on how to get there.”
While many companies have been — publicly, at least — advertising their mom-friendly atmospheres, a new report shows that when it comes to actual postpartum treatment, workplaces aren’t doing enough.
In a survey conducted over the summer by Moms First, a nonprofit dedicated to advancing women’s economic freedom, and the consulting firm APCO Worldwide, 1,000 moms reported varying negative feelings in regard to returning to their jobs after giving birth. For starters, 1 in 3 moms said they have considered, or are considering, leaving the workforce entirely. The survey further shows that companies should not view female-promoting workplaces as merely a positive but as an “economic imperative.”
Women reported that they started experiencing workplace concerns immediately after learning that they were expecting. This was not only in regard to the amount of time they’d be permitted for parental leave, but also showcased concerns about child care thereafter and about their own feelings in returning to work — especially while their children are still young.
“It’s not surprising that the overwhelming majority of moms dread returning to work after caregiving. What is surprising is that employers are still not doing enough to step up and fix it,” Reshma Saujani, the founder and CEO of Moms First, said in a news release.
“Investing in moms is an economic imperative. Employers have the opportunity to change this, and when they do, they will be rewarded with loyalty from top talent: moms.”
While 1 in 3 considered leaving their workplace, 3 of 4 said they felt that their workplaces could be doing more to support working parents with young children. Moms also felt somewhat supported by their managers. However, they noted that company leadership seldom sets examples that could help improve the overall culture.
In addition to exploring new opportunities — including those that provide more opportunities for remote work — moms noted some tangible benefits that would be ideal.
The benefits they mentioned included on-site child care and a transition period after leave that would allow for a part-time schedule.