RMD going to 72?

[CardsFan]

I'm not sure that moving the RMD to 72 has anything to do with SS. I think the damage done to stretch IRA's will bring in more tax dollars sooner. But again this will likely not have anything to do with SS.

I think this is probably the logic. The 72 RMD age is the carrot, eliminating stretch IRA's is the the stick.

SS has nothing to do with it.

 

[twin]

And discussion on whether or not people who are currently required to pull inherited RMDs would be grandfathered in under the old rules or subject to the new rules?

 

[RockLife]

RMD's taxes do nothing to affect SS solvency IMO. Currently, there is no link between the General Fund and the SS trust fund.

Of course that doesn't negate your "Vote" assertion.

Got it, thanks guys. I've had my head wrapped around SS a little too much lately.

 

[free2020]

Wouldn’t the best reason for upping the RMD age be the increased life expectancy for the boomer generation?

 

[SecondCor521]

And discussion on whether or not people who are currently required to pull inherited RMDs would be grandfathered in under the old rules or subject to the new rules?

See post #15 in this thread.

ETA: Whoops. You were asking about RMDs on inherited IRAs. See GrayHare's post below, which seems more on point.

 

[GrayHare]

And discussion on whether or not people who are currently required to pull inherited RMDs would be grandfathered in under the old rules or subject to the new rules?

"The amendments made by this subsection shall apply to calendar years beginning after December 31, 2020, with respect to designated beneficiaries of participants whose date of death is after December 31, 2019."

I take that to mean if the person who originally contributed to the IRA (the participant) died/dies prior to the end of 2019, the proposed changes requiring withdrawal within 10 years will not apply.

 

[copyright1997reloaded]

I see this is a very bad thing (TM) for anyone (like me) who has a sizable 401k and a relatively young child. I get the slight deferment of RMDs at the loss of my child being able to utilize a beneficiary IRA over their lifetime. If my 401k remains even close to what it is today, that would result in a sizable tax bill for my child if they have to take it over 5 (or even 10) years.

I've been holding off on Roth Conversions because a) I am still working and b)getting some deferred income from my previous mega-corp job, but I will have to reassess that plan if this passes as is. I'm not even sure Roth conversions are safe, I think they will eventually be fodder for government revenue enhancement plans.

 

[Sunset]

..... I'm not even sure Roth conversions are safe, I think they will eventually be fodder for government revenue enhancement plans.

Not sure what you mean, however I feel Roth's are safe from taxes as the tax was already paid on them. If Roths are not safe from double taxation, then all money is not safe, like in a regular bank account.

I suppose the gov't could make those rules, and even force Apple pay to be changed to income tax a person 15% every-time they paid for something or made a transfer of money.

But I don't think the govt would last long doing something so stupid.

 

[bmcgonig]

Not sure what you mean, however I feel Roth's are safe from taxes as the tax was already paid on them. If Roths are not safe from double taxation, then all money is not safe, like in a regular bank account.

I suppose the gov't could make those rules, and even force Apple pay to be changed to income tax a person 15% every-time they paid for something or made a transfer of money.

But I don't think the govt would last long doing something so stupid.

I agree with you in principle but on the other hand the interest/dividends/capital appreciation on the ROTH hasn't been taxed. So that part wouldn't be double taxation.

 

[Golden sunsets]

My wife hit 70 last June, and she made her little RMD the other day. The real money is in my IRA Rollover account, and I'm 2 years from having to take RMD's.

It's nice to have no debts and no future expected needs for the RMD funds. But we will probably just roll it over into a tax paid investment of some kind and save it for The Kids.

It'd be nice for a reprieve--even if it's just another couple of years.

Won't your DW have to take another RMD this year, seeing that she turned 70.5 last year? She can defer the first RMD till the following year after she has turned 70.5, but will also have to take her second RMD in the year she turns 71.5.

 

[DeborahB]

Won't your DW have to take another RMD this year, seeing that she turned 70.5 last year? She can defer the first RMD till the following year after she has turned 70.5, but will also have to take her second RMD in the year she turns 71.5.

I have a June birthday also. It means that the year I turn 70 and the year I turn 70.5 are the same. I made one RMD that year. Someone with a July birthday could defer it until the next year. You never do two in the same year.

 

[copyright1997reloaded]

Not sure what you mean, however I feel Roth's are safe from taxes as the tax was already paid on them. If Roths are not safe from double taxation, then all money is not safe, like in a regular bank account.

I suppose the gov't could make those rules, and even force Apple pay to be changed to income tax a person 15% every-time they paid for something or made a transfer of money.

But I don't think the govt would last long doing something so stupid.

The folks here just don't get it. The need for tax revenue will reach crisis levels, and it won't matter what is logical - it will only matter where the money can be taken from.

Retirement savings accounts represent a huge pot of temptation, and represent a huge pot of money currently not providing enough revenues to the never ending federal budget deficit. Do you actually think that situation is going to get better?

So the proposal gets buy in by seniors giving seniors a small delay in RMD's, but more importantly (to those wanting to get that money in taxes) cuts off the deferred tax wealth distribution. So now all that money that was put into these plans under the assumption that heirs can draw down over their (beneficiary) lifetimes is out the door.

What makes you think similar revenue raising plans won't be attached to Roth's? Today Roth's don't have a RMD requirement for the owner, but do have for the beneficiaries (over their lifetime). Having a similar rule on Roth's (i.e. must be RMD's within 5 or 10 years) would result in less tax-free growth on those inherited Roth's and more taxable money in the system.

Let's just say I don't have the same faith as you in the government not doing "something so stupid", especially since it seems they are trying to out-stupid each other with these kind of proposals lately.

 

[bingybear]

I see this is a very bad thing (TM) for anyone (like me) who has a sizable 401k and a relatively young child. I get the slight deferment of RMDs at the loss of my child being able to utilize a beneficiary IRA over their lifetime. If my 401k remains even close to what it is today, that would result in a sizable tax bill for my child if they have to take it over 5 (or even 10) years.

I've been holding off on Roth Conversions because a) I am still working and b)getting some deferred income from my previous mega-corp job, but I will have to reassess that plan if this passes as is. I'm not even sure Roth conversions are safe, I think they will eventually be fodder for government revenue enhancement plans.

We all have to make our own choices as the cards are dealt and re-dealt. I understand what you mean about roths being safe. I'm concerned that rules (options) for those inheriting roths could change to make them remove assets more quickly than current law. Our situation is different, but I increased my roth conversions significantly starting in 2018. I sometimes rethink my choices as the cards change. I don't this this law will benefit me, but I can adjust with it. That is all any of us can do.

What changes will you make if you loose the stretch IRA option for your child? Would you retire earlier to make roth conversions affordable? Would funding a roth 401k be an option?

It is a game of choices and they are often not static.

 

[Golden sunsets]

I have a June birthday also. It means that the year I turn 70 and the year I turn 70.5 are the same. I made one RMD that year. Someone with a July birthday could defer it until the next year. You never do two in the same year.

That is actually not correct. You can defer the first payment until April 1st of the year after you turn 70.5, however if you do defer the first payment, you must take the second distribution by 12/31 of the same year. So if one's 70th birthday occurs before June 30th of a certain year, they also turn 70.5 the same year, but can defer that first payment until April ist of the following year. But they must also take their normal distribution for that year by 12/31. Example: I turned 70 last December 1st. I turn 70.5 this June 1st. I have until April of 2020 to take my first distribution, but if I wait until 2020, then I will also have to take my second distribution in 2020. I do not want to pump up my income next year, by taking 2 RMD's in the same year, so I am taking my first distribution this year, even though I don't have to.


This link explains the rule: https://www.irs.gov/newsroom/irs-re...o-take-required-retirement-plan-distributions

 

[foxfirev5]

The folks here just don't get it. The need for tax revenue will reach crisis levels, and it won't matter what is logical - it will only matter where the money can be taken from.

Retirement savings accounts represent a huge pot of temptation, and represent a huge pot of money currently not providing enough revenues to the never ending federal budget deficit. Do you actually think that situation is going to get better?

So the proposal gets buy in by seniors giving seniors a small delay in RMD's, but more importantly (to those wanting to get that money in taxes) cuts off the deferred tax wealth distribution. So now all that money that was put into these plans under the assumption that heirs can draw down over their (beneficiary) lifetimes is out the door.

What makes you think similar revenue raising plans won't be attached to Roth's? Today Roth's don't have a RMD requirement for the owner, but do have for the beneficiaries (over their lifetime). Having a similar rule on Roth's (i.e. must be RMD's within 5 or 10 years) would result in less tax-free growth on those inherited Roth's and more taxable money in the system.

Let's just say I don't have the same faith as you in the government not doing "something so stupid", especially since it seems they are trying to out-stupid each other with these kind of proposals lately.

I feel exactly the same way. One way or another taxes will go up. I also feel uneasy about all those Roth conversions based on the assumption they will never be taxed.

 

[steelyman]

I’ve only done two Roth conversions and currently don’t plan on doing any more but not because of concern about changes to Roths themselves.

If someone does have conversions in their plan I think it would be best to continue as normal.

 

[RunningBum]

There's no requirement to keep records of dividends and capital gains in Roth accounts now. How are they going to go back and tax that?

 

[DeborahB]

"The amendments made by this subsection shall apply to calendar years beginning after December 31, 2020, with respect to designated beneficiaries of participants whose date of death is after December 31, 2019."

I take that to mean if the person who originally contributed to the IRA (the participant) died/dies prior to the end of 2019, the proposed changes requiring withdrawal within 10 years will not apply.

That is actually not correct. You can defer the first payment until April 1st of the year after you turn 70.5, however if you do defer the first payment, you must take the second distribution by 12/31 of the same year. So if one's 70th birthday occurs before June 30th of a certain year, they also turn 70.5 the same year, but can defer that first payment until April ist of the following year. But they must also take their normal distribution for that year by 12/31. Example: I turned 70 last December 1st. I turn 70.5 this June 1st. I have until April of 2020 to take my first distribution, but if I wait until 2020, then I will also have to take my second distribution in 2020. I do not want to pump up my income next year, by taking 2 RMD's in the same year, so I am taking my first distribution this year, even though I don't have to.


This link explains the rule: https://www.irs.gov/newsroom/irs-re...o-take-required-retirement-plan-distributions

Oh okay, good point. I wouldn’t want to pay taxes on two RMDs in the same year.

 

[ivinsfan]

That is actually not correct. You can defer the first payment until April 1st of the year after you turn 70.5, however if you do defer the first payment, you must take the second distribution by 12/31 of the same year. So if one's 70th birthday occurs before June 30th of a certain year, they also turn 70.5 the same year, but can defer that first payment until April ist of the following year. But they must also take their normal distribution for that year by 12/31. Example: I turned 70 last December 1st. I turn 70.5 this June 1st. I have until April of 2020 to take my first distribution, but if I wait until 2020, then I will also have to take my second distribution in 2020. I do not want to pump up my income next year, by taking 2 RMD's in the same year, so I am taking my first distribution this year, even though I don't have to.


This link explains the rule: https://www.irs.gov/newsroom/irs-re...o-take-required-retirement-plan-distributions

Thanks for this link, DH just turned 70 in Jan and we both started SS in Jan as well. He is still working this year so we will have to put some thought into handling the RMDs....according to this we most likely need to pull an RMD for 2019 for tax planning..Hopefully any changes to the RMD laws will be in place by the end of the year.

 

[copyright1997reloaded]

We all have to make our own choices as the cards are dealt and re-dealt. I understand what you mean about roths being safe. I'm concerned that rules (options) for those inheriting roths could change to make them remove assets more quickly than current law. Our situation is different, but I increased my roth conversions significantly starting in 2018. I sometimes rethink my choices as the cards change. I don't this this law will benefit me, but I can adjust with it. That is all any of us can do.

What changes will you make if you loose the stretch IRA option for your child? Would you retire earlier to make roth conversions affordable? Would funding a roth 401k be an option?

It is a game of choices and they are often not static.

Right now I am stuck because I like what I am doing in my second life (teaching full time college gig) along with a pension from mega-corp plus some deferred pay from mega-corp (2019 is the last year for it) plus interest/dividends from investments. Even with maxing out deferral on my schools 457 plan I hit the 35% marginal rate on my 2018 filing (and 18.7% average rate). My tax brackets are lower because I am filing HOH (not joint). Yes, I know it is a first world problem!

My original 'plan' when I retired the first time in 2009 is that I would do conversions of my mega-corp 401k to Roth between 2010 and my FRA. That has been put on hold until I leave my current job in a few years. Next year I won't have any taxable $ from my previous mega-corp 409 plan, and I was going use my current schools 457 to make Roth contributions (instead of traditional 457 deductible contributions), at least up to the top of the 32% bracket.

When I finally leave my current job, my income would be considerably lower than now and I would do as much Roth conversion as possible until 70.5 (or whatever the new law would allow) and likely defer social security to age 70. Given the age differential between myself and my child, my strategy might be to get as much transferred as legally possible so that DC can max out their Roth (as compared to my Roth).

 

[Golden sunsets]

Thanks for this link, DH just turned 70 in Jan and we both started SS in Jan as well. He is still working this year so we will have to put some thought into handling the RMDs....according to this we most likely need to pull an RMD for 2019 for tax planning..Hopefully any changes to the RMD laws will be in place by the end of the year.

On your last point, the change in law as proposed does not affect (or allow a change in RMD's) for anyone who meets the current law by 12/31/19 of this year. I was hoping I might be able to defer my first RMD, but as I will reach 70.5 before 12/31/19 I will not be able to take advantage of the change, if it goes into effect. I think your DH would fall under the same rule, if he turns 70.5 this year.

 

[ivinsfan]

On your last point, the change in law as proposed does not affect (or allow a change in RMD's) for anyone who meets the current law by 12/31/19 of this year. I was hoping I might be able to defer my first RMD, but as I will reach 70.5 before 12/31/19 I will not be able to take advantage of the change, if it goes into effect. I think your DH would fall under the same rule, if he turns 70.5 this year.

the devil is always in the details isn't it. We will be watching it closely.

 

[Spock]

There's no requirement to keep records of dividends and capital gains in Roth accounts now. How are they going to go back and tax that?

Then how do you track being able to withdraw the principal but not the gains without a penalty?

 

[eytonxav]

That is actually not correct. You can defer the first payment until April 1st of the year after you turn 70.5, however if you do defer the first payment, you must take the second distribution by 12/31 of the same year. So if one's 70th birthday occurs before June 30th of a certain year, they also turn 70.5 the same year, but can defer that first payment until April ist of the following year. But they must also take their normal distribution for that year by 12/31. Example: I turned 70 last December 1st. I turn 70.5 this June 1st. I have until April of 2020 to take my first distribution, but if I wait until 2020, then I will also have to take my second distribution in 2020. I do not want to pump up my income next year, by taking 2 RMD's in the same year, so I am taking my first distribution this year, even though I don't have to.


This link explains the rule: https://www.irs.gov/newsroom/irs-re...o-take-required-retirement-plan-distributions

Yep, I turn 70 mid-June of this year, so already started to take my RMD, as I did not want to defer until April of next year and take a double hit. I am not sure how and when this bill will come out, but it would be nice to get another couple of years of deferral depending on when it become effective, as I do not need the full RMD and would prefer not having to reinvest the excess.

 

[RunningBum]

Then how do you track being able to withdraw the principal but not the gains without a penalty?

Good point. They can get my gains backwards by seeing my contributions ($0 for me) and conversions. My balance minus that amount must be gains of some sort. So it wouldn't be hard at all.

Still, I can see them putting RMDs on a Roth to limit how much gets passed on, but not taxing any of it.