Frequently Asked Questions

On December 29, 2022, President Biden signed the 2023 Appropriation Act which included SECURE Act 2.0. This law has various provisions that will be taking effect throughout the upcoming years. The below provisions may impact your account at Harbor, please reference the IRS website for additional details.

Starting in 2023 the Required Minimum Distributions age was increased from 72 to 73. This will remain in effect until 2033, when RMD age will increase to 75. Individuals turning 72 after December 31, 2022, and before January 1, 2033, the RMD age is 73. Those born in or before 1950 are not affected by this law and must continue to take their RMD.

Prior to the SECURE Act 2.0, the excise tax for failing to take an RMD was 50% of the amount not withdrawn. SECURE Act 2.0 reduces that tax to 25% and possibly 10% if it is corrected within two years.

Individuals with a terminal illness are not subject to the 10% additional tax on early withdrawal. The individual must submit evidence of the terminal illness to the IRS. Under this provision, there is no limit to how many withdrawals can be taken, and the distribution may also be repaid within three years.

The SECURE Act 2.0 has removed the 10% early withdrawal penalty that results from earnings on an excess contribution. This applies when the corrective action is taken before the income tax return due date.

Individuals who have self-certified their status as a victim of domestic abuse within one year of experiencing domestic abuse, can withdraw the lesser of $10,000, indexed for inflation, or 50% of the account balance without incurring a 10% early distribution penalty. The distribution can be repaid within a 3-year period and under certain circumstances receive a refund for income taxes on the amount repaid.

SECURE Act 2.0 allows for individuals to request withdrawals for immediate or unforeseeable financial needs for emergency expenses without the 10% early withdrawal tax. The amount of the distribution is the lesser of $1,000 or the account balance reduced by $1,000. Individuals are allowed one distribution per calendar year if the account is repaid within a year or once every three years if not repaid.

SECURE Act 2.0 made the special rules that provided tax-favored withdrawals and repayments for those affected by a qualified disaster leading to an economic loss. Qualified disaster is defined by the IRS as a major disaster that occurred on or after January 26, 2021, and was declared so by President Biden. Those affected receive favorable tax treatment for up to $22,000 of qualified disaster recover distribution from an IRA. There is a 3-year repayment period that begins the day after the distribution. If the individual repays within that period, there are no federal tax owed on the distribution.

Under SECURE Act 2.0, the QCD limit is now indexed for inflation. In 2024, the QCD limit has increased from $100,000 per year to $105,000.