RMD going to 72?

[joeea]

It wasn't really invented, per se. It was an outcome of the IRA rules for beneficiaries that were pretty simple... a spouse beneficiary had to withdraw under the rules that would normally apply to them and non-spouse beneficiaries would have to withdraw over their lifetime (like RMDs). Makes perfect sense to a 1974 legislator.

Then someone gets clever and devises a strategy to defer taxes even longer.. by naming a grandchild or great-grandchild as a beneficiary.

You seem to assume that this inter-generational transfer wasn't an intended part of the legislation. And thus, you aren't bothered if it that benefit is taken away now.

Of course 401ks weren't "intended" to become the basis for retirement savings for the masses, replacing pensions. Yet, that's what happened.

Would you be bothered if they were taken away now?

 

[pb4uski]

.... Whoever inherits the inherited IRA has to pay taxes on it in that year.

NO! Totally wrong. That is what the debate is all about... 5 years or 10 years or lifetime.

Current law is over the lifetime of beneficiary.

 

[pb4uski]

You seem to assume that this inter-generational transfer wasn't an intended part of the legislation. And thus, you aren't bothered if it that benefit is taken away now.

Of course 401ks weren't "intended" to become the basis for retirement savings for the masses, replacing pensions. Yet, that's what happened.

Would you be bothered if they were taken away now?

Inter-generational transfer was inevitable... after all, someone had to inherit any leftover IRA money and it would typically be a surviving spouse or kids or nieces or nephews for those without children. The cleverness was extending it to grandchildren or great-grandchildren and IMO, extending deferral of taxes way beyond what was intended.

On the second part, I think you are wrong... the decline of defined benefit pension plans had already started before tIRAs, 401k, 403b, et al were popularized under a view that the three-legged stool would become 2 or 2 1/2 legs.

 

[Another Reader]

NO! Totally wrong. That is what the debate is all about... 5 years or 10 years or lifetime.

Current law is over the lifetime of beneficiary.

No, there is no provision for an inherited IRA to receive a second stretch when it is inherited by the child or other inheritor of the stretch beneficiary. If there is, let me in on how to do that.

 

[pb4uski]

No, there is no provision for an inherited IRA to receive a second stretch when it is inherited by the child or other inheritor of the stretch beneficiary. If there is, let me in on how to do that.

Well, it depends.... if I die my spouse inherits my IRA... it is essentially combined with hers... when she dies then my kids inherit her IRA (which still includes my IRA) and withdraw it based on their lives... so my IRA is in effect inherited twice, once by my spouse and then again by my spouse's beneficiaries.

If DW makes grandkids or great-grandkids beneficiaries, then it stretches it even further than if her beneficiaries are our kids.

But even if you inherit an inherited IRA, you don't pay tax when you inherit it as you claimed in post#250... your RMDs are based on the age of the person that you inherited it from... but obviiously you can chose to pay tax on it earlier if you wish to.

... The RMD calculation cannot be reset when a successor beneficiary inherits an inherited IRA. They succeed to the original beneficiary’s inherited IRA. Phyllis cannot use her own age to calculate RMDs on the IRA that originally belonged to Jim. When Mike inherited, his life expectancy factor was determined by the age he turned in the year after Jim’s death. He finds this factor on the Single Life Expectancy Table. Let’s say that Mike was 62 in the year after Jim’s death. His life expectancy factor would be 23.5. That factor gets reduced by one each year until the inherited account is emptied, no matter who might later become a successor beneficiary of the inherited IRA.

When Phyllis inherits the IRA five years later, she simply picks up the life expectancy factor where Mike leaves off. He started at 23.5 so five years later the factor is down to 18.5. The RMD for the fifth year will be based on a factor of 18.5 whether Mike or Phyllis takes the RMD. Phyllis’ factor for the sixth year will be 17.5 and she will continue to reduce the factor by one each year. ...

 

[RunningBum]

I agree that they needed to have a rule for non-spouse beneficiaries.... after all, someone would need to inherit the IRA if there were no spouse... I contend that when they designed that rule that they had an owner's (or spouses) children or nieces or nephews... the next generation... in mind. I don't believe that they had beneficiaries who were 60 to 70 years younger than the owners like grandchildren or great-grandchildren in mind.

If a 20 year old contributed to an 401k or IRA, had kids at 30 and grandkids at 60 and died at 70 and made the 10 yo grandchild a beneficiary and the grandchild took small distributions until they were 70 then that would be 110 years of deferral! 50 years for the owner and 60 years for the grandchild/beneficiary.

If you believe that the beneficiary rules were designed to accomplish this then I think that you are deluding yourself.

To use your own words a few posts earlier...

Do you have a citation or evidence for this statement or is it just your opinion?

 

[Another Reader]

Well, it depends.... if I die my spouse inherits my IRA... it is essentially combined with hers... when she dies then my kids inherit her IRA (which still includes my IRA) and withdraw it based on their lives... so my IRA is in effect inherited twice, once by my spouse and then again by my spouse's beneficiaries.

If DW makes grandkids or great-grandkids beneficiaries, then it stretches it even further than if her beneficiaries are our kids.

But even if you inherit an inherited IRA, you don't pay tax when you inherit it as you claimed in post#250... your RMDs are based on the age of the person that you inherited it from.

Your statement is incorrect. I said whoever inherits the inherited IRA. Looks pretty clear to me. And my RMD's are based on my age, not the decedent's age.

 

[RunningBum]

Your statement is incorrect. I said whoever inherits the inherited IRA. Looks pretty clear to me. And my RMD's are based on my age, not the decedent's age.

What's your source for that?

https://www.irahelp.com/slottreport/inheriting-inherited-ira (not a definitive source but I think they know IRAs) says if you inherit and inherited IRA, you stay to the same RMD schedule the person you directly inherited it from was on.

 

[Another Reader]

I would also point out that when your spouse combines your IRA with hers, it becomes HER IRA. That's semantics, but you are correct in a way. It passes twice without being taxed immediately, with the stretch provision being applied to the second transfer, not the first, as her life table applies to that transfer.

 

[pb4uski]

.... It's important to remember the inheritance is a one time deal. Whoever inherits the inherited IRA has to pay taxes on it in that year.

No, there is no provision for an inherited IRA to receive a second stretch when it is inherited by the child or other inheritor of the stretch beneficiary. If there is, let me in on how to do that.

Your statement is incorrect. I said whoever inherits the inherited IRA. Looks pretty clear to me. And my RMD's are based on my age, not the decedent's age.

You said that if someone inherits an inherited IRA that they had to pay taxes on it in that year (presumably the year that the second party inherited it).

And that is totally wrong. They have to take RMDs and pay taxes based on the age of the person that they inherited the inherited IRA from. See Slott quote included a couple posts ago on Phyllis.

 

[pb4uski]

Congress explicitly changed the rules on stretch IRA's, encouraging savings and tax planning for inheritance. ...

Do you have a citation or evidence for this statement or is it just your opinion?

Also, when did this alleged change happen?

I agree that they needed to have a rule for non-spouse beneficiaries.... after all, someone would need to inherit the IRA if there were no spouse... I contend that when they designed that rule that they had an owner's (or spouses) children or nieces or nephews... the next generation... in mind. I don't believe that they had beneficiaries who were 60 to 70 years younger than the owners like grandchildren or great-grandchildren in mind. ...

To use your own words a few posts earlier...

Do you have a citation or evidence for this statement or is it just your opinion?

I said "I contend" and "I don't believe", both of which suggests that it is a statement of opinion rather than a fact. Why is that so hard for you to understand?

The other post that I challenged made a statement that proported to be a fact and didn't have any qualifiers suggesting that it was an opinion.

 

[Another Reader]

What's your source for that?

https://www.irahelp.com/slottreport/inheriting-inherited-ira (not a definitive source but I think they know IRAs) says if you inherit and inherited IRA, you stay to the same RMD schedule the person you directly inherited it from was on.

If that's correct, that's a very important piece of information. My conversations with Fidelity and the estate planning attorney when I inherited the accounts had a different result. Last I looked, the website had no ability to name a beneficiary for an inherited IRA. Time to do some homework! Thanks!

ETA: There is now a provision to do this on the Fidelity website. Going to make some phone calls on Tuesday... Thanks again!

 

[Another Reader]

I said "I contend" and "I don't believe", both of which suggests that it is a statement of opinion rather than a fact. Why is that so hard for you to understand?

The other post that I challenged made a statement that proported to be a fact and didn't have any qualifiers suggesting that it was an opinion.

I wish you would back off on being so argumentative. We are all here to learn and exchange ideas.

For example, I just learned that the IRA's I inherited can have a beneficiary named and and that person can use my remaining IRS life to take the withdrawals. This is counter to what I was told when I inherited them and is actionable advice that I will use next Tuesday. Worth the subscription price...

 

[RunningBum]

I wish you would back off on being so argumentative. We are all here to learn and exchange ideas.

I'll take the blame for the challenge, and move on.

 

[steelyman]

I think we are all learning something from this discussion at least in the sense of corner cases or things we hadn’t personally considered before.

I also think that nobody really knows anything for sure regarding the SECURE or RESA bills until something concrete is welded into the tax code in final form.

I know that a sibling and I are discussing and starting to make plans about how we each will likely adapt to changes.

 

[pb4uski]

I wish you would back off on being so argumentative. We are all here to learn and exchange ideas.

For example, I just learned that the IRA's I inherited can have a beneficiary named and and that person can use my remaining IRS life to take the withdrawals. This is counter to what I was told when I inherited them and is actionable advice that I will use next Tuesday. Worth the subscription price...

If I hadn't been so argumentative regarding your erroneous statement then you wouldn't have learned anything today, would you? If I had just let it pass then you would still think that your beneficiaries had to pay taxes immediately. You're welcome.

I could claim that you were the argumentative one. You made a statement that was wrong... I responded that it wasn't the case that one needed to pay taxes if inheriting an inherited IRA in that year... you argued and said if there is a way to avoid paying the taxes at once then show me... so I showed you and provided the Slott example. Only after RB weighed in and agreed with me did you concede that what you had posted was wrong.

I provided evidence for my view. You just kept insisting that you were right and I was wrong based on conversations that you had with others but not with research or evidence.

I'm done with you for today.

 

[Another Reader]

If I hadn't been so argumentative regarding your erroneous statement then you wouldn't have learned anything today, would you? If I had just let it pass then you would still think that your beneficiaries had to pay taxes immediately. You're welcome.

I could claim that you were the argumentative one. You made a statement that was wrong... I responded that it wasn't the case that one needed to pay taxes if inheriting an inherited IRA in that year... you argued and said if there is a way to avoid paying the taxes at once then show me... so I showed you and provided the Slott example. Only after RB weighed in and agreed with me did you concede that what you had posted was wrong.

I provided evidence for my view. You just kept insisting that you were right and I was wrong based on conversations that you had with others but not with research or evidence.

I'm done with you for today.

You are welcome to put me on "ignore." I'm moving on.

 

[Llep]

I'm grateful for the overwhelming bipartisan support for this House bill.



What aggravates me is neither FOX [or FOX Business] nor CNN, etc have time to report and discuss this bill [or other bills affecting the American people] because they are too busy fighting each other along partisan lines. Now I just turn off that circus and get the news that interest me on line.



.

I’ve had FOX Biz on all day and it has been discussed including an interview that went into detail. I think it was on Charles Payne’s show

 

[Chuckanut]

I was happy to see that our elected Reps worked together so well to pass these reforms. And I let my Rep know that.

 

[Helena]

I’ve had FOX Biz on all day and it has been discussed including an interview that went into detail. I think it was on Charles Payne’s show

I might have seen that if I had FOX Business news channel on all day. But I usually watch it a few hours in the morning. I like the British guy. I've also watched others like Charles Payne. Just now I turned it on and the host said Congress is doing NOTHING. It's not the first time I've heard them say that obvious falsehood. They should be using that airtime to report about this bill the House just passed.

.

 

[pb4uski]

Congress explicitly changed the rules on stretch IRA's, encouraging savings and tax planning for inheritance. ...

I just saw this nugget in the House Ways and Means Committee summary of the bill and it was relevant to our discussion earlier so I post it:

Under current law, participants are generally required to begin taking distributions from their retirement plan at age 70 ½. The policy behind this rule is to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.

Seems to state congressional intent pretty clearly to me!

https://waysandmeans.house.gov/site...s/documents/SECURE Act section by section.pdf

 

[FIREchief]

I just saw this nugget in the House Ways and Means Committee summary of the bill and it was relevant to our discussion earlier so I post it:

Under current law, participants are generally required to begin taking distributions from their retirement plan at age 70 ½. The policy behind this rule is to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.

Seems to state congressional intent pretty clearly to me!

Why on earth does Washington want to "ensure" that I spend my savings before I die? Can't I incorporate any and all assets I have of every kind into my estate planning? Yikes!! Talk about big brother. We all know that the clear intent was to make the bill revenue neutral, regardless of what they may publish.

 

[Helena]

.

I have my own well-planned IRA withdrawal strategy taylor-made to my needs while paying the least tax possible. At least the House bill gives me two more years to do that. Hopefully the Senate won't delay that benefit until year 2023 which would deny me that benefit.

.

 

[Another Reader]

I just saw this nugget in the House Ways and Means Committee summary of the bill and it was relevant to our discussion earlier so I post it:



Seems to state congressional intent pretty clearly to me!

https://waysandmeans.house.gov/site...s/documents/SECURE Act section by section.pdf

That's what this particular group of Congress people say today to justify what they are doing. It was not the intent of those that invented the stretch IRA way back when.

ETA: That Mitt Romney Roth maneuver probably left a pretty bad taste in a lot of people's mouths, making it a good time to change the rules.

 

[pb4uski]

Why on earth does Washington want to "ensure" that I spend my savings before I die? Can't I incorporate any and all assets I have of every kind into my estate planning? Yikes!! Talk about big brother. We all know that the clear intent was to make the bill revenue neutral, regardless of what they may publish.

Its poorly worded... the intent is that it is withdrawn and taxed before you die... they don't really care if you spend it or save it... just that it gets taxed.