TOPIC A: THE NEW RULES OF RETIREMENT

SECURE Act 2.0 gives retirees more time for their nest egg to grow and helps workers save more.

- SANDRA BLOCK

HOURS BEFORE HUSTLING OUT of town in December, Congress passed a federal spending bill that includes SECURE Act. 2.0, a potpourri of provisions that could affect the way you save for retirement and manage your nest egg after you stop working.

New distribution rules. In 2023, the starting age for taking required minimum distributions from traditional individual retirement accounts, 401(k)s and other tax-deferred plans increases to 73, up from 72. In 2033, the starting age will increase to 75.

The change means that individuals who turn 72 this year will get a one-year delay in RMDs, says Tim Steffen, director of advanced planning for Baird. (Technically, you can wait until April 1, 2025, to take your first RMD, but that means you'll need to take two RMDs in 2025.) The legislation isn't retroactive, so if you turned 72 in 2022, you're still required to take your first RMD no later than April 1, 2023.

Retirees who don't need money from their tax-deferred accounts may welcome the delay in RMDs, especially if they need more time for their portfolios to recover from last year's bear market. Similarly, individuals who are in their seventies and still working may appreciate the opportunity to delay distributions until they retire and fall into a lower tax bracket.

The delay could also give retirees more time to convert some of the money in their traditional IRAs to a Roth IRA. Roth IRAs have no RMDS, and because they're funded with after-tax dollars, withdrawals are tax-free. But once RMDs kick in, you can't convert to a Roth until you've taken your required distribution, which could result in a hefty tax bill.