Required minimum distribution, or RMD, rules continue to evolve.

The "final" RMD regulations that practitioners have been waiting for since the passage of the SECURE Act in December 2019 are still in the works.

While we don't know the exact timing, we do know that final regulations will apply for "determining RMDs for calendar years beginning no earlier than 2024," quoting the IRS's July 14 Notice (2023-54, Transition Relief and Guidance Relating to Certain Required Minimum Distributions -- tinyurl.com/r59fv35c).

Let's review how we got here -- and talk about the new relief the IRS is providing to those affected by the wait. As a word of caution, RMD rules are complicated and evolving, plus each taxpayer's situation is unique -- be sure to talk with your tax adviser before taking any actions.

One of the provisions of the SECURE Act that continues to be discussed involves inheriting a traditional, tax-deferred IRA.

The SECURE Act established a new 10-year limit for distributions for most beneficiaries (as opposed to a potentially much longer inheritor's life expectancy).

In February 2022, the IRS issued proposed regulations for the SECURE Act (tinyurl.com/3j6vb45t) -- these are the regs that are still to be finalized.

One of the proposed regs provided that a designated beneficiary who in 2020 or later inherited an IRA for which the original owner HAD been taking RMDs was required to CONTINUE taking RMDs for the next nine years, then empty the account in the 10th calendar year after the death of the original owner.

Excluded from the designated beneficiary requirement was a new type of beneficiary created by the SECURE Act: "eligible designated beneficiary," defined in IRS Publication 590-B (tinyurl.com/yc6tx8dh) as:

-- The IRA owner's surviving spouse

-- The IRA owner's minor child

-- A disabled or chronically ill individual

-- Any other individual who is not more than 10 years younger than the IRA owner

Prior to the proposed regulations, many had interpreted the SECURE Act to require emptying the inherited IRA at the end of the 10-year period, without the need for annual withdrawals, irrespective of whether the original owner had been taking RMDs.

The IRS acknowledged the disconnect in October 2022 in Notice 2022-53 (tinyurl.com/5y924pne). The IRS noted that beneficiaries of IRA owners who died in 2020 reported that they had not taken RMDs in 2021 and were unsure of whether they would be required to take RMDs in 2022. Keep in mind that penalties (excise taxes) are due for failure to timely take RMDs.

The IRS came through for those affected in Notice 2022-53 by waiving penalties for beneficiaries of IRA owners who died in 2020 for 2021 and 2022 RMDs -- as well as 2022 RMDs for beneficiaries of owners who died in 2021.

At the time, the penalty (excise tax) was 50% of the RMD that was not taken by the required due date. Now, as a result of SECURE Act 2.0, which became law at the end of 2022, the excise tax has been reduced to 25%, or "possibly 10% if the RMD is timely corrected within two years," according to the IRS (tinyurl.com/ykjb3zbu).

Then, in July's Notice 2023-54, the IRS extended penalty waivers for 2023 RMDs for beneficiaries of IRA owners who "died in 2020, 2021, or 2022."

You might wonder if penalty waivers also waive the need to actually take money out of the inherited IRA as an RMD.

When asked, an IRS spokesperson commented that "the intention was to provide relief for 2023, so effectively, there is no RMD due for 2023 for those beneficiaries described in the notice." The spokesperson added that the same is true for RMDs in 2021 and 2022 for those beneficiaries described in Notice 2022-53.

Meanwhile, the wait for final RMD regulations continues.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Do you consider yourself wealthy?

Forty-eight percent of more than 1,000 adults between the ages of 21 and 75 surveyed recently answered "yes" when they were asked if they felt they were wealthy. The Charles Schwab Modern Wealth Survey, released in June, was conducted online in March 2023 (tinyurl.com/4zzkwsfw).

I'm a firm believer in wealth as a broad concept, not limited to the bank account. Very simply, there is a lot more to life, including health, family, friends, free time, work -- and achieving one's purpose in life.

But, what about that cash?

The Schwab study found something interesting. The average net worth (including retirement funds held by employers, but not including any real estate) of those who said they felt either "very wealthy" or "somewhat wealthy" was $560,000. Not a million-plus, but just over about one-half of that amount.

When probed further, respondents did indeed define wealth broadly. When asked "What does wealthy mean to you?" only 32% said "money." Forty percent said "well-being." In response to a separate question, 61% said it was more important to have time than to have money.

What about you? Where do you stand? Schwab's 10-question self-assessment will help you get some insight. There are no "wrong" answers.

The beginning part of the question for each of the following comparisons is "Please select which statement best describes how you think of wealth. To me wealth means ...":

-- Having a fulfilling personal life OR working on my career.

-- Not having to stress over money OR having more money than most people I know.

-- Enjoying experiences OR owning many nice things.

-- Having a healthy work-life balance OR maximizing my earnings even if it impacts my work-life balance.

-- Being generous with loved ones now OR leaving an inheritance.

-- Paying for experiences to spend time with my family now OR leaving an inheritance for my family.

-- Being in good health OR being successful.

-- Enjoying healthy relationships with family and loved ones OR having a lot of money.

-- Having the flexibility of working where and how I want (in-person, hybrid, remote) OR having a higher salary.

-- Spending money now to have more experiences OR sacrificing experiences now in order to save money for later.

Schwab also asked survey respondents about planning. I'm not happy with what they found: 65% of those surveyed said they had no formal financial plan. Of that group:

-- 44% said they didn't have enough money to need a plan. (My take: The less money you have, the more likely a plan will make a difference in your financial life.)

-- 21% said creating a plan seemed "too complicated." (My take: Make a simple plan that works for you. For example, review this month's spending. Are you satisfied with what you found? If not, create a plan to incorporate changes.)

-- 20% said they did not have enough time to develop a plan. (My take: Review where you are spending time and determine how to shuffle priorities.)

Thirty-five percent of the respondents had a formal plan. Almost all of them (92%) felt confident they would reach their goals. That's the rationale for putting some effort into planning. It will make life ever so much easier. . .

By the way, if you are still thinking numbers, here they are:

There are 5.3 million high-net-worth individuals living in the U.S., each having wealth of $1 million or more (including net investable assets -- property, cash and listed holdings -- minus any liabilities), according to the USA Wealth Report 2023 by Henley & Partners, a global leader in residence and citizenship by investment (tinyurl.com/ju2x72ms). In addition, there are 770 billionaires living in the U.S., each with wealth of $1 billion or more.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

The difference between what you know and what you don't -- how big is that divide when it comes to financing retirement?

Do you have a good understanding of where you are when it comes to retirement preparedness? Thirty-eight percent of households are in good shape, according to a recent Center for Retirement Research at Boston College (CRR) brief titled "How Well Do People Perceive Their Retirement Preparedness?" (tinyurl.com/4xj4z5j5). Another 19% of households are in trouble, and they know it.

Then there are the 43% of households that fall into one of two categories -- "not worried enough" or "too worried." Either can be a concern, but "not worried enough" is likely the bigger one.

The CRR brief's results are based on calculations involving the National Retirement Risk Index (NRRI), which the CRR uses to measure "the share of working-age households that is 'at-risk' of being unable to maintain their pre-retirement standard of living in retirement" (tinyurl.com/4xb5yumn), and the Federal Reserve's 2019 Survey of Consumer Finances (tinyurl.com/har77pms).

The Fed survey asked households to self-assess their financial preparedness for retirement, and roughly a third self-reported being at risk. In contrast, the NRRI projected that nearly 50% were at risk of not having enough for retirement.

When the NRRI results were compared with the individual household assessments, it was determined that 28% of households thought they were not at risk, while the NRRI predicted that they were (this group was tagged "not worried enough"), and 15% thought they would fall short of retirement goals, while the NRRI projected they will have enough (the group was "too worried"). When broken down by income, high-income households were most likely to be "not worried enough," while low-income households were more likely to be "too worried."

What is behind the incorrect perceptions of retirement preparedness? The CRR brief offered some possible explanations.

Of the two groups, I'll focus on "not worried enough." For them, the trouble spots included:

-- Housing debt-to-asset ratio. According to the CRR brief, "As the housing market improved, households may have been comforted by the rising value of their asset, without considering how much they still owed." This factor was especially strong for high-income households, as they generally owned more expensive homes.

-- A defined contribution retirement plan (like a 401(k) account) that was below the median. The CRR brief calls this a "wealth illusion," using the example that "$100,000 looks like a lot of money to many people even though it provides only about $617 per month in retirement income." According to the CRR, this issue is a higher probability for low- and middle-income households.

-- Two earners but one saver. "Many dual-earner households may not realize they will have to replace both spouses' earnings to maintain their standard of living in retirement," according to the CRR brief. "So, not surprisingly, dual-earner households where only one spouse has a retirement plan are more likely to be 'not worried enough.'" Another point: The problem increases with income level because Social Security "replaces a smaller share of pre-retirement income for high earners."

The key danger for this group? Their lack of worry means that they won't take action, and their overconfidence could lead them to underestimate possible risks.

All this points toward making sure you understand what you have saved for retirement. Do an audit of where you stand now.

Your 401(k) reports should include an estimate of what you can expect to receive in monthly income if your account balance is used to buy an annuity.

The Social Security Administration website (ssa.gov) can provide an estimate of what you will be receiving once you begin taking Social Security benefits.

If you have an IRA, you can use a calculator like the savings distribution tool at 360 Degrees of Financial Literacy (tinyurl.com/mr373fvy) to get an estimate of how long your account will remain liquid based on withdrawals.

I would rather be in the "too worried" group and continuing (and possibly increasing) my efforts to save for retirement than be in the "not worried enough" group and find myself caught short financially once retirement has arrived.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION