RMD going to 72?

[FIREchief]

More importantly I think that the long run success of a country depends on trust and the belief that a deal is a deal (i.e. contracts are honored). That's what I deserve by believing that the deal as outlined to me 27 years ago would be honored.

I'm right there with you brother. This act is shameful, and the fact that it is an "overwhelming bipartisan effort" suggests that there is little hope for improvement. Of course, it's all just a mirror of the voters. More the pity....

People like to think that it is "the rich" who are getting screwed here. It's not. The rich don't depend on IRAs and the like for their retirement incomes. It is more the hard working middle class who bought into "the deal" when it was rolled out decades ago.

 

[pb4uski]

....What peeves me (a bit) are those on this forum the the attitude of oh well or that somehow the stretch provision was a mistake - it was not, and it was put in the law on purpose because they knew that many people (including me) would have been reluctant to otherwise utilize it.

First, are you talking about the next generation (kids, nieces and nephews) or subsequent generations (grandchildren, great-grandschildren, grand-nieces and nephews)?

Second, do you have any cites that the stretch "was put in the law on purpose"? Obviously it was put in there on purpose, otherwise ti wouldn't be in it... what I mean is that it was purposefully designed to allow the IRA owner to extend tax deferral beyond the next generation to subsequent generations, because my view is that is what they are trying to circumvent... and BTW, doing a piss poor job of with 5 years or 10 years.

 

[pb4uski]

.... If the problem is ultra-rich bypassing generations, then just address that.

That would work for me. Leave rule as is for kids, nieces and nephews... 10 years for anyone else.

 

[pb4uski]

... I won’t try to guess at the reason behind the proposed changes, but increased revenue doesn’t pass the sniff test.

+1 Those who are mad about the provisions and consider it a big tax grab as the motiation are off base.

 

[joeea]

More importantly I think that the long run success of a country depends on trust and the belief that a deal is a deal (i.e. contracts are honored). That's what I deserve by believing that the deal as outlined to me 27 years ago would be honored.

Yup.

No laws should ever be changed. After all, a deal is a deal no matter how old. We deserve no less. And our country depends on it.

 

[copyright1997reloaded]

First, are you talking about the next generation (kids, nieces and nephews) or subsequent generations (grandchildren, great-grandschildren, grand-nieces and nephews)?

Second, do you have any cites that the stretch "was put in the law on purpose"? Obviously it was put in there on purpose, otherwise ti wouldn't be in it... what I mean is that it was purposefully designed to allow the IRA owner to extend tax deferral beyond the next generation to subsequent generations, because my view is that is what they are trying to circumvent... and BTW, doing a piss poor job of with 5 years or 10 years.

Next generation (child).

I will have to look it up/find it. I remember (vaguely) when the law was slightly changed to make the default when setting up a 401k with a named beneficiary the ability to convert to a lifetime distribution. This might have been late 80's...

 

[pb4uski]

Got it. I think the term stretch can have different interpretations.

One is the next generation (kids, nieces and nephews). The current laws provisions to allow non-spouse beneficiaries to take distributions over their life was part of "the deal" from the beginning, albeit an arguably generous provision. I guess that we'lll need to agree to disagree as to how much people relied on that in making their decision to save on a tax deferred basis... I think it was a minor factor. I know for sure that it wasn't a factor in my decision.

The other interpretation of stretch is to the second generation (grand-children and great-grandchildren, grate nieces and great nephews). I believe that this is the one that was unitended and that policymakers find most objectionable and perceive was a loophole that needs to be closed.

Now that said, the proposed 5 year or 10 year distribution to non-spousal beneficiaries is so inelegant of a solution that perhaps it is just a thinly disguised money grab. In some cases the impact might be able to be partially offset by maxing our 401k contributions or contributing to deductible IRAs.

 

[Tiger8693]

Yup.

No laws should ever be changed. After all, a deal is a deal no matter how old. We deserve no less. And our country depends on it.

Copyright, give up. Some people are just not possible to have discussions with and somehow, continue to be allowed to post vitriol.

 

[FIREchief]

That would work for me. Leave rule as is for kids, nieces and nephews... 10 years for anyone else.

I assume you're referring to rules for the initial beneficiary (and I think your suggestion is valid). There is still the scenario where child inherits but passes before taking all RMDs. Under current law, the successor beneficiary (often a grandchild) continues under the decedent parent's RMD schedule.

 

[steelyman]

Whatever they do, I hope they make up their minds and not drag it out until late December as has been done in the recent past.

Real people want to be able and have room to plan based on their personal circumstances.

 

[FIREchief]

Whatever they do, I hope they make up their minds and not drag it out until late December as has been done in the recent past.

Real people want to be able and have room to plan based on their personal circumstances.

This is a very valid concern, but I doubt congress shares our concern.

Somebody who has named a conduit trust as beneficiary of an IRA certainly would want time to review and possibly update estate planning documents.

 

[wolf]

Yup.

No laws should ever be changed. After all, a deal is a deal no matter how old. We deserve no less. And our country depends on it.

++1. Glad there are still some of us who have common sense!

Make the rules. But do not change them years later!

What a shame. When did we lose, fairness, honor, and integrity!

 

[Sunset]

I fear having children have to cashout an IRA over say 10 years and then after they are used to the income having it suddenly go away.

Gee what a horrible thing to happen to them, better give the IRA away to charity instead if you truly feel that would be better.


Otherwise write a stern letter to them before dying, telling them that during the 10 year cash out period, they are to take the money and invest it in the stock market and to not spend it.

 

[Sunset]

I understand. You never expected rules to change. You are disappointed.

I expected to be able to take advantage of file and suspect Social Security rules. Until they changed them. Oh well.

++++++++++++++++++
I too missed the file and suspend of SS... That cost me Many tens of thousands of missed dollars.

 

[Helena]

Yup.

No laws should ever be changed. After all, a deal is a deal no matter how old. We deserve no less. And our country depends on it.

In that case, there should be NO INCOME TAX on Social Security income... because that was the original deal.

In fact, there should be no income tax at all... that wasn't the original deal either !!

.

 

[pb4uski]

Yup.

No laws should ever be changed. After all, a deal is a deal no matter how old. We deserve no less. And our country depends on it.

In that case, you probably owe the government more if the recent change in tax laws resulted in your paying less taxes.

 

[JustCurious]

In that case, there should be NO INCOME TAX on Social Security income... because that was the original deal.

In fact, there should be no income tax at all... that wasn't the original deal either !!

.

By that logic, there should not be a Constitution either, that was not part of the original deal when the Mayflower landed in 1620.

 

[joeea]

In that case, you probably owe the government more if the recent change in tax laws resulted in your paying less taxes.

Actually, they'd owe me a small amount, if "recent" were the sole criterion.

But I expect changes. Some work to my benefit, others don't. So it goes.

 

[Helena]

By that logic, there should not be a Constitution either, that was not part of the original deal when the Mayflower landed in 1620.

Revolution usually resets all rules.

.

 

[MichaelB]

When it comes to thread wandering, this one is a stand-out. In a few short posts it went from a proposed change in RMDs to the Mayflower, the Constitution, and revolution. There’s some real creative minds and elastic thinking here.

 

[target2019]

Maynard G Krebs never worried about his RMD at any age. Work!

 

[copyright1997reloaded]

Given the likely passage of this, I've already changed my investment strategy. My current plan:

For 2019:
1) Do things to keep my total AGI w/i the 24% bracket (single). This includes selling anything I have a loss on (which isn't much) and putting as much as necessary into traditional forms of 457b and 403b plans, but only as much as needed to not exceed the 24% bracket.
2) Contribute as much as possible (given the traditional forms of 1) to a Roth 457B and/or Roth 403B. I just switched my 457B contribution from traditional to Roth.
3) Spend down cash reserves as needed to make up for $ going into Roth's that would otherwise be part of my normal spend. This has the added benefit that I will decrease my taxable interest income.

In 2020 my plan will be similar, except easier to implement as I will no longer have any 409A payments from my ex-mega corp. This should allow me to contribute only to the Roth 457 and perhaps 403 and not have to make any traditional (tax deferred) contributions. I might even be able to do a small tIRA to Roth conversion while still sticking to the 24% bracket.

When I retire/quit from my teaching gig (at latest when I am 65), continue with conversions until 72. Defer social security until 70 to maximize my ability to convert.

 

[Car-Guy]

Maynard G Krebs never worried about his RMD at any age. Work!

I'm showing my age but I know who he was without looking it up.... It would not have matter to him anyway. He (Bob Denver) died at age 70.

 

[target2019]

I'm showing my age but I know who he was without looking it up.... It would not have matter to him anyway. He (Bob Denver) died at age 70.

Maynard G Krebs still lives...

 

[Car-Guy]

Maynard G Krebs still lives...