RMD going to 72?

[MichaelB]

Getting back on topic, the WSJ reported on the Senate delay of the bill. https://www.wsj.com/articles/senate...ll-11559681143?mod=searchresults&page=1&pos=4

Among the items causing concern are the House’s resistance to letting people pay for home-schooling expenses with money in 529 tax-advantaged education-savings accounts. Senators are also looking at a House-passed provision that relaxes pension-funding rules for some community newspapers and considering whether they want to make even larger retirement-policy changes than the House, a GOP Senate aide said.

 

[FIREchief]

Getting back on topic, the WSJ reported on the Senate delay of the bill. https://www.wsj.com/articles/senate...ll-11559681143?mod=searchresults&page=1&pos=4

Thanks MichaelB. Sounds like politics as usual.

 

[copyright1997reloaded]

Thanks!

I just found out this evening that one of them is MY senator.

I have already emailed him letting him know if he messes up the
RMD age to 72 in 2020 benefit I will NEVER vote for him again !!
[and I suspect that will be the least of his worries!]

.

And I will email him with the opposite. This is a bad bill.

 

[Helena]

.

This is the latest info I've found on the net:


" TO THE FLOOR? It’s no secret that Senate Majority Leader Mitch McConnell (R-Ky.) has been prioritizing nominations since divided government returned to Washington, with a special focus on filling federal courts.

But certain Senate Republicans are starting to get vocal about wanting the retirement bill, H.R. 1994 (116), to get the full floor process, so the chamber can work through the issues holding up what’s generally a broadly popular bipartisan bill. “I hope it does,” Sen. Ted Cruz (R-Texas) told Pro Tax when asked about the bill getting to the floor, before once more pitching for “the very important expansions of 529 savings plans that benefit every single public school student in America.” (The House dropped expansions for both elementary and secondary school expenses and homeschooling costs between when the bill passed the Ways and Means Committee and hit the House floor.)

The prevailing thought off the Hill is that GOP leadership does not want to give the bill floor time, and instead wants to find a way to nudge the Republicans currently blocking the bill off their holds. “We’re working through some holes on it and making some progress,” was all Senate Finance Chairman Chuck Grassley (R-Iowa) would say on the matter on Wednesday, adding that he hadn’t checked on whether the bill could get or would need floor time.

People on the Hill have said that Sens. Mike Lee (R-Utah) and Marco Rubio (R-Fla.) have at least at some point had holds on the retirement bill. But Cruz and Sen. Pat Toomey (R-Pa.) have generally been viewed as the bigger obstacles. Rubio said Wednesday that the bill could “potentially” need floor time, though he acknowledged how “very limited” that is. "

https://www.politico.com/newsletters/morning-tax/2019/06/06/to-the-floor-443931

.

 

[Helena]

And I will email him with the opposite. This is a bad bill.

Fine with me if he gets tossed out in the next election.

.

 

[FIREchief]

.

This is the latest info I've found on the net:


" TO THE FLOOR? It’s no secret that Senate Majority Leader Mitch McConnell (R-Ky.) has been prioritizing nominations since divided government returned to Washington, with a special focus on filling federal courts.

But certain Senate Republicans are starting to get vocal about wanting the retirement bill, H.R. 1994 (116), to get the full floor process, so the chamber can work through the issues holding up what’s generally a broadly popular bipartisan bill. “I hope it does,” Sen. Ted Cruz (R-Texas) told Pro Tax when asked about the bill getting to the floor, before once more pitching for “the very important expansions of 529 savings plans that benefit every single public school student in America.” (The House dropped expansions for both elementary and secondary school expenses and homeschooling costs between when the bill passed the Ways and Means Committee and hit the House floor.)

The prevailing thought off the Hill is that GOP leadership does not want to give the bill floor time, and instead wants to find a way to nudge the Republicans currently blocking the bill off their holds. “We’re working through some holes on it and making some progress,” was all Senate Finance Chairman Chuck Grassley (R-Iowa) would say on the matter on Wednesday, adding that he hadn’t checked on whether the bill could get or would need floor time.

People on the Hill have said that Sens. Mike Lee (R-Utah) and Marco Rubio (R-Fla.) have at least at some point had holds on the retirement bill. But Cruz and Sen. Pat Toomey (R-Pa.) have generally been viewed as the bigger obstacles. Rubio said Wednesday that the bill could “potentially” need floor time, though he acknowledged how “very limited” that is. "

https://www.politico.com/newsletters/morning-tax/2019/06/06/to-the-floor-443931

.

Thanks for posting that update. I'm not a fan of this bill, but if the house ten year version prevails, I can live with it.

It baffles me that they don't want the bill to take away valuable floor time. What the heck are they doing with that time anyways??

 

[RunningBum]

Thanks!

I just found out this evening that one of them is MY senator.

I have already emailed him letting him know if he messes up the
RMD age to 72 in 2020 benefit I will NEVER vote for him again !!
[and I suspect that will be the least of his worries!]

.

Helena, how much of a benefit is this for you, really?

It's not as simple as saying you won't pay taxes on IRA distributions for 2 more years, so you save that much.

If you don't take any at 70 and 71, your account will be larger, and the RMDs starting at 72 will be a little larger--possibly even pushing you into a higher tax bracket. Depending on how long you live, you'll either mostly drain the IRA (and thus pay tax on it anyway), or your heirs will pay the tax--almost certainly at a higher rate since the bill forces them to take it over 10 years, not to mention that they may still be in their earning years.

You could say you don't care about your heirs, but that must mean you plan to drain it before you go, so you'll be paying those taxes sooner or later, and deferring them just lets that IRA grow and be taxed on a larger amount.

So I'm wondering if you've figured out just how much this bill actually saves you (if any at all) under reasonable assumptions about how long you live, investment return rate, current and future tax rate, etc.

The only real benefit I see is if you are going to take the RMD amount you no longer have to take and instead convert that amount to a Roth, where it can grow tax free, rather than tax deferred. What am I missing?

.

 

[FIREchief]

The only real benefit I see is if you are going to take the RMD amount you no longer have to take and instead convert that amount to a Roth, where it can grow tax free, rather than tax deferred. What am I missing?

I think this is pretty much it. That's what I would/will do. Also, only about half the people will gain two years. If a person's birthday is in the second half of the year, they'll only gain one year of RMD relief.

The whole RMD change is somewhat of a joke. If they move it to 75 or 80 (or just eliminate it altogether), then there may be some value. They won't.

 

[pb4uski]

.... The whole RMD change is somewhat of a joke. If they move it to 75 or 80 (or just eliminate it altogether), then there may be some value. They won't.

Agree that the RMD change is not consequential. But just remember, the whole purpose of the RMD was to ensure that that deferred income ultimately did get taxed.

If they moved it to 80 or eliminated it, it might accompanied by a much shorter fuse on non-spousal beneficiaries... like immediately or 5 years of something like that.

I would favor leaving the age for RMDs as is and having non-spousal beneficiaries take RMDs based on the age that the decedent who they inherited it from would have been rather than some arbitrary 10 year period... IOW, do RMDs for non-spousal beneficiaries on the same schedule as if the original owner was still alive.

 

[CardsFan]

Also, only about half the people will gain two years. If a person's birthday is in the second half of the year, they'll only gain one year of RMD relief.

Yeah. This is where I will fall (DW's tIRA will be fully converted to Roth by then).

I see no upside for us, only the downside of the elimination of the "stretch tIRA".

BUT, if the only downside is that DS might have to pay more taxes on the free money he inherits, then I can live (or actually die) with that.

 

[CardsFan]

I would favor leaving the age for RMDs as is and having non-spousal beneficiaries take RMDs based on the age that the decedent who they inherited it from would have been rather than some arbitrary 10 year period... IOW, do RMDs for non-spousal beneficiaries on the same schedule as if the original owner was still alive.

^ This actually makes the most sense, or have an inherited non-spousal tIRA subject to a maximum flat tax (20%? 25%?)

 

[street]

I see one benefit for me and that it gives me more years to take money out before RMD starts for tax implications. I like the idea of the expanded time frame so I can get more out under a less tax bracket.

 

[Helena]

Helena, how much of a benefit is this for you, really?

It's not as simple as saying you won't pay taxes on IRA distributions for 2 more years, so you save that much.

If you don't take any at 70 and 71, your account will be larger, and the RMDs starting at 72 will be a little larger--possibly even pushing you into a higher tax bracket. Depending on how long you live, you'll either mostly drain the IRA (and thus pay tax on it anyway), or your heirs will pay the tax--almost certainly at a higher rate since the bill forces them to take it over 10 years, not to mention that they may still be in their earning years.

You could say you don't care about your heirs, but that must mean you plan to drain it before you go, so you'll be paying those taxes sooner or later, and deferring them just lets that IRA grow and be taxed on a larger amount.

So I'm wondering if you've figured out just how much this bill actually saves you (if any at all) under reasonable assumptions about how long you live, investment return rate, current and future tax rate, etc.

The only real benefit I see is if you are going to take the RMD amount you no longer have to take and instead convert that amount to a Roth, where it can grow tax free, rather than tax deferred. What am I missing?

.

First of all... when one is a senior, two years can be a big deal. My father died of a heart attack two months before his 73 birthday.

Second, I retired early at age 55 and have followed my own personal financial/tax plan which is tailor-made for me. Every year for the past decade I have made withdrawals from my traditional IRA. But I control the amounts which vary year to year to meet my specific tax plan.

Third, one must take into consideration that income tax on Social Security benefits along with income tax on RMDs complicate any tax plan.

Fourth, I like the freedom to follow my own personalized tax plan that suits my own specific needs. Two more years of doing that would be very beneficial to me financially and otherwise.

Last, but not least... news articles about the House retirement bill say that bill is very popular. So obviously I am not the only one who likes the increase in the RMD age from 70 to 72 in 2020.

As for my heirs... I only have a portion of my assets in tax-deferred accounts. Since my only child died young, my will and my POD accounts divide everything between my niece and nephew. If I thought they would complain about having to pay taxes on that portion of my money... I would change my will and leave it all to charity.

.

 

[RunningBum]

First of all... when one is a senior, two years can be a big deal. My father died of a heart attack two months before his 73 birthday.

Second, I retired early at age 55 and have followed my own personal financial/tax plan which is tailor-made for me. Every year for the past decade I have made withdrawals from my traditional IRA. But I control the amounts which vary year to year to meet my specific tax plan.

Third, one must take into consideration that income tax on Social Security benefits along with income tax on RMDs complicate any tax plan.

Fourth, I like the freedom to follow my own personalized tax plan that suits my own specific needs. Two more years of doing that would be very beneficial to me financially and otherwise.

As for my heirs... I only have a portion of my assets in tax-deferred accounts. Since my only child died young, my will and my POD accounts divide everything between my niece and nephew. If I thought they would complain about having to pay taxes on that portion of my money... I would change my will and leave it all to charity.

.

But you can't even put a ball park $ amount on this?

 

[Helena]

But you can't even put a ball park $ amount on this?

I have done RMD and tax calculations. I know the amount.

The question is... why do you want to know ??

.

 

[Helena]

i see one benefit for me and that it gives me more years to take money out before rmd starts for tax implications. I like the idea of the expanded time frame so i can get more out under a less tax bracket.

Bingo !!

 

[RunningBum]

I have done RMD and tax calculations. I know the amount.

The question is... why do you want to know ??

.

Because I think it's way too small to raise such a fuss about, to the point of voting out a congress person, when you look at the whole picture including when the IRA is finally emptied and all taxes are paid.

Maybe your case is somehow different. As I said, I'd like to know what I'm missing, to learn something. I can't learn when people won't back up their reasons with facts.

 

[FIREchief]

First of all... when one is a senior, two years can be a big deal. My father died of a heart attack two months before his 73 birthday.

Second, I retired early at age 55 and have followed my own personal financial/tax plan which is tailor-made for me. Every year for the past decade I have made withdrawals from my traditional IRA. But I control the amounts which vary year to year to meet my specific tax plan.

Third, one must take into consideration that income tax on Social Security benefits along with income tax on RMDs complicate any tax plan.

Fourth, I like the freedom to follow my own personalized tax plan that suits my own specific needs. Two more years of doing that would be very beneficial to me financially and otherwise.

Last, but not least... news articles about the House retirement bill say that bill is very popular. So obviously I am not the only one who likes the increase in the RMD age from 70 to 72 in 2020.

As for my heirs... I only have a portion of my assets in tax-deferred accounts. Since my only child died young, my will and my POD accounts divide everything between my niece and nephew. If I thought they would complain about having to pay taxes on that portion of my money... I would change my will and leave it all to charity.

.

Am I correct in assuming that your birthday falls within the first six months of the year?

 

[FIREchief]

I see one benefit for me and that it gives me more years to take money out before RMD starts for tax implications. I like the idea of the expanded time frame so I can get more out under a less tax bracket.

Why do you think taking money out, in the absence of the RMD requirement, will fall "under a less (sic) tax bracket?" Also, does your use of the word "years" mean that your birthday falls between Jan 1 and June 30?

 

[street]

^ there are tax bracket limits to your income, right?

 

[Helena]

Because I think it's way too small to raise such a fuss about, to the point of voting out a congress person, when you look at the whole picture including when the IRA is finally emptied and all taxes are paid.

Maybe your case is somehow different. As I said, I'd like to know what I'm missing, to learn something. I can't learn when people won't back up their reasons with facts.

Are you for real ?!

"I think" your knowledge is "way too small" about me and the senator for you to have an opinion about my opinion.

.

 

[GrayHare]

I have to agree with RunningBum. An additional 1.5 years pre-RMD looks like a wash to me on average since there are scenarios in which people will have less after-tax money because larger RMDs upon age 72 push them into higher tax brackets.

 

[RunningBum]

Are you for real ?!

"I think" your knowledge is "way too small" about me and the senator for you to have an opinion about my opinion.

.

My apologies for trying to see if there's anything I can learn from you. Don't worry, it won't happen again.

 

[samclem]

Moderator note:
-- This thread can be a useful discussion of a piece of potential legislation that is of interest to many retirees (early and not-so-early)
-- Interpersonal sniping and commentary directed at a specific legislator is far less useful. The efforts of all to avoid the rancor and direct political advocacy is appreciated.
Thanks.

 

[USGrant1962]

...

I would favor leaving the age for RMDs as is and having non-spousal beneficiaries take RMDs based on the age that the decedent who they inherited it from would have been rather than some arbitrary 10 year period... IOW, do RMDs for non-spousal beneficiaries on the same schedule as if the original owner was still alive.

Yup, makes perfect sense in the spirit of the original INDIVIDUAL retirement account concept.