As we approach the end of the year, it may be a good idea to consider boosting your retirement savings by exploring options for contributions, investments, or asset distribution. The SECURE Act of 2019, the SECURE 2.0 Act, and final RMD regulations have brought significant changes to IRAs over the past few years. We have discussed some of these provisions in previous posts—and we will certainly continue to cover relevant topics moving forward. Here's a brief list of IRA details worth keeping in mind.
Alternative Assets Are Getting More Attention
The current federal administration has directed the Department of Labor (DOL) to update guidance on how retirement plans, such as 401(k)s, can evaluate alternative investments for their participants. While self-directed IRAs (SDIRAs) have always had access to these options, there may soon be more widely available choices due to a recent increase in interest. For instance, the administration has highlighted the lack of private equity resources as a reason for opening the market, aiming to provide greater funding opportunities for business creation or expansion. If the DOL’s new guidance makes it easier for retirement plans to offer alternative assets to more participants, this relaxation of rules could also create more opportunities for SDIRA owners.
New Rules for Trust Beneficiaries
There are sometimes good reasons to name a trust as the beneficiary of an IRA. However, trusts are often named when it might be more sensible to name individuals directly. The final required minimum distribution (RMD) regulations, released in July 2024, include provisions that are more accommodating to trusts than the proposed regulations from 2022. Additionally, IRA custodians like STRATA no longer need to obtain detailed trust information from the trustees of trust beneficiaries. This new rule increases the likelihood that financial organizations will rely more on the trustees (and their tax or legal advisors) rather than trying to determine the distribution options available for the trust. One key takeaway: IRA owners should understand their reasons for naming a trust as a beneficiary and seek sound advice for the trustees of the trust.
New Rules for RMDs
Two newer rules apply to those who have reached the age at which they must take RMDs from their own IRAs or who are beneficiaries of a recently deceased IRA owner. First, if you are at RMD age and have more than one Traditional IRA, you can combine your multiple RMDs and withdraw them from any of your IRAs. This rule has been in place for many years. However, there is a new twist in the final RMD regulations: if you take a distribution from any of your Traditional IRAs in an RMD year, you cannot roll over any RMD amount. This includes the RMD from all your IRAs, not just the one from which you make the distribution. Previously, the rule did not require aggregating RMDs from multiple IRAs when determining what could be rolled over; now it does. So if you are considering rolling over any part of an IRA distribution in an RMD year, you must know the total RMD amount from all your IRAs—and ensure none of that amount is rolled over.
Second, the final RMD regulations provide relief to beneficiaries in the year the IRA owner dies. Specifically, if the IRA owner has not taken the RMD before death, the beneficiaries will not face a penalty for missing the RMD deadline of December 31 in the year of death. However, they are still required to fulfill the year-of-death RMD by December 31 of the following year. This change is particularly helpful when IRA owners pass away toward the end of the year. Now, beneficiaries won’t have to rush to withdraw the IRA owner’s RMD in the year of death and will have more time to meet the requirement.
Qualified Charitable Distributions for IRA Owners—And for Beneficiaries
Since qualified charitable distributions (QCDs) became permanent a decade ago, they have grown increasingly popular. QCDs are distributions made directly to an eligible charity at age 70½ or older. Those taking QCDs should keep these key points in mind.
- QCDs allow individuals to avoid taxation on the distribution, without having to itemize deductions on a federal income tax return.
- The annual QCD amount is substantial: $108,000 (for 2025).
- Checks or electronic transfers must be issued in the name of the charity. (Checks may still be delivered to the charity by the account owner.)
- QCDs are available to IRA owners or to beneficiaries.
QCDs are especially appealing for those who need to take RMDs but may not require the income. QCDs can meet the individual’s charitable goals while still allowing them to claim the standard deduction on their tax return.
Spousal Contributions Can Help, Even In “Retirement”
Recent research indicates that an increasing number of individuals aged 65 and older are working than ever before. Even if this work is part-time, it can qualify workers to make IRA contributions, not only for themselves but also for a spouse. As long as a married worker has earned income and files a joint tax return, an IRA contribution to a non-working spouse can be made (if otherwise eligible). Although the working spouse’s income is used for the contribution, the deposit still must be made to the non-working spouse’s IRA. This type of contribution can help older savers boost their retirement savings even if they are subject to RMDs. It can also be used by savers of any age when only one spouse is earning income.
Additional Information
This IRA information is designed to support you in making informed decisions about your transactions. While we recommend consulting with a financial advisor for personalized guidance, our IRA experts at STRATA are here to help you understand the rules and explore SDIRA options that may help you achieve your retirement savings goals.
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