By Nick Fortuna, Barron’s featuring Brett Gersack CFP®, AIF®, Senior Wealth Advisor
Q: I turn 72 in November. I understand that I have until April 1, 2023, to take my initial required minimum distribution from my retirement account, followed by a second RMD by Dec. 31, 2023. If the Senate passes the Secure Act 2.0 in its present form and it becomes law, will I still be required to take an initial RMD by the end of 2022? What happens if I defer until early 2023, when it’s already law?
You’ll need to take your initial RMD no later than April 1, 2023, and a second RMD later that year regardless of whether the Secure Act 2.0 becomes law.
The bill that passed the House pushes back the age at which seniors must begin taking RMDs to 73, so long as they turn 72 after Dec. 31, 2022. Since you turn 72 this year, you’re subject to the current rules and will need to begin taking RMDs in 2022.
Passage of the bill as it’s currently written won’t change that, according to Brett Gersack, senior wealth advisor at financial-planning firm Halbert Hargrove. In addition, if you don’t take your initial RMD this year, taking two RMDs in 2023 could bump you into a higher tax bracket, depending on your income level, Gersack said.
The Secure Act 2.0 further increases the age for initial RMDs to 74 starting in 2030 and to 75 starting in 2033. Delaying the age for initial RMDs is “going to be helpful for a lot of people, just not this person,” Gersack said.
Q: I’m a widower turning 70, and I collect a Social Security spousal benefit thanks to my late wife. I haven’t started to take my own benefit, and I don’t know if I should now apply for it, continue with the spousal benefit, or if I’m entitled to both. I should have full benefits based on my work history, but I didn’t work for 20 years while caring for my wife.
You should apply for your individual benefit at 70 because once you reach that age, waiting to claim it no longer results in a higher monthly check. “Your Social Security benefit will not increase after age 70, so there is no reason to delay,” said Jane Voorhees, director of financial planning at wealth-management firm Aline Wealth.
You’ll receive either your individual benefit, based on your work record, or your existing spousal benefit, whichever is higher. If you’re unsure, contact your local Social Security Administration office, Voorhees said.
Q: My wife has contributed her 40 quarters into Social Security but now works for a school district with its own retirement system. Does she forfeit her Social Security income for the money in her teachers retirement system?
When she retires, your wife likely will get both her teacher’s pension and a reduced Social Security benefit due to the SSA’s Windfall Elimination Provision, according to Kimberlee Davis, managing director of the Bahnsen Group, a financial-planning firm.