Proposed Changes to IRA rules

[kyounge1956]

Here's an article from Forbes about proposed changes to the RMD rules. If adopted the new rules would

• allow 60-day rollovers of non-spousal inherited IRAs
• eliminate RMD's if balance of all tax-favored accounts is under $50K

 

[GregLee]

Nice! And just in time for me to avoid my first RMD in 2013, hopefully, provided the $50K limit applies separately for each spouse (since my wife's IRA is too big).

 

[meierlde]

Actually when tax reform hits I see going back to the old RMD rules where the savers life expectancy was used to calculate the RMD even for inherited IRAs/401k its an easy low hanging fruit to get more revenue. Note that at 50k value the first years RMD is really about 3k which should not bump anyone up much in tax brackets. At 80 if the balance were still 50k its 5k.
But since IRA's and 401ks were designed for retirement, why allow eternal tax postponement, which the current rules do. About the only other thing that is lost if you take an RMD and pay the taxes is the shield in Bk.

 

[samclem]

Actually when tax reform hits I see going back to the old RMD rules where the savers life expectancy was used to calculate the RMD even for inherited IRAs/401k its an easy low hanging fruit to get more revenue. Note that at 50k value the first years RMD is really about 3k which should not bump anyone up much in tax brackets. At 80 if the balance were still 50k its 5k.
But since IRA's and 401ks were designed for retirement, why allow eternal tax postponement, which the current rules do. About the only other thing that is lost if you take an RMD and pay the taxes is the shield in Bk.

This is a good commonsense change to the law. We're talking about some fairly small accounts here, and if Granny only has $50K in the account and wants to save it for a few more years, I can't see much of a problem at this balance level. Folks in this situation need all the flexibility they can get. It might be the difference between needing to file a tax return and not, which saves everybody some hassle.
As pointed out in the article, I think kids will be important beneficiaries. If they don't have to take the RMDs from inherited accounts the money can grow untouched until they are 18. That could make more money available for college or other expenses, they can start the RMDs then.

So, any exploitable angles? It seems that if you can delay RMDs by some means, you'll show lower income for longer and maybe qualify for more fruit from the government money tree (medical insurance supplements, lower tax rates, low-income tax credits, etc). The $50K limit is fairly low, so probably no practical way to exploit this.