RMD going to 72?

[gwraigty]

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

More likely, to get that money in a taxable account where earnings/gains from that point will be subject to tax.

 

[HI Bill]

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

I have a spreadsheet showing the contributions I made each year, and downloaded all available statements online from VG. But the problem is, I'm missing statements for the years 2001-2004 (Vanguard's online records don't go back that far). I've used the maximum allowed contribution during those years as placeholders, but all I have to go on is an ending balance for 2005 of $12K (I made a $4K contribution that year). Depending on market gains/losses, I could have made contributions going back as far as 2001.

Does anyone have any ideas on how I could solve this problem? Can I ask VG for archived statements?

 

[Helena]

.

I'm happy this bill is very likely to become law.

 

[Helena]

What has been left out of the discussion is that inherited IRA's must be spent within 10 years. That will help pay for some of this.

News article I read said the companion Senate bill has it at 5 years.
So that will need to be compromised before the bill is passed.

.

 

[CardsFan]

.

I'm happy this bill is very likely to become law.

Why? What are the pros and cons for you?

To me, the elimination of a stretch IRA for DS does not sit well. I can live with it (pun intended), but to me it out weighs the 1.5 year extension to RMD time.

OTOH, the only reason this matters, is my IRA is significant. First world problem.

 

[bingybear]

I have a spreadsheet showing the contributions I made each year, and downloaded all available statements online from VG. But the problem is, I'm missing statements for the years 2001-2004 (Vanguard's online records don't go back that far). I've used the maximum allowed contribution during those years as placeholders, but all I have to go on is an ending balance for 2005 of $12K (I made a $4K contribution that year). Depending on market gains/losses, I could have made contributions going back as far as 2001.

Does anyone have any ideas on how I could solve this problem? Can I ask VG for archived statements?

Do you have your tax forms for all those years?

 

[Helena]

Why? What are the pros and cons for you?

No cons in the House bill for me.

It extends RMD two years for me and that's two more years of taking a smaller distribution and still paying zero income tax.

.

 

[audreyh1]

I'm still confused about the proposed changes to an inherited IRA as the language seemed off.

If a non-spouse inherits your IRA and is less than 10 years younger than you, what are the rules?

 

[CardsFan]

I'm still confused about the proposed changes to an inherited IRA as the language seemed off.

If a non-spouse inherits your IRA and is less than 10 years younger than you, what are the rules?

From what I could gather, a non-spouse loses the stretch IRA ability unless they are a child of the decedent, and meets certain restrictions (very young, disabled, etc). The house bill requires the IRA to be emptied in 10 years, the senate is 5 years. There is an exemption in the senate bill for $400k, I think.

I'll wait and see what they actually do.

 

[Another Reader]

This won't affect the IRA's I inherited, but whoever gets my IRA's is screwed. I should have converted more in the down years, but hindsight and all that...

 

[gwraigty]

Why? What are the pros and cons for you?

To me, the elimination of a stretch IRA for DS does not sit well. I can live with it (pun intended), but to me it out weighs the 1.5 year extension to RMD time.

OTOH, the only reason this matters, is my IRA is significant. First world problem.

Yes. I chose to take RMD's from an inherited IRA over 5 years instead of using my life expectancy. My bad. In my grief, I wasn't thinking through the options clearly. It pushed my husband and I into the next higher tax bracket for those 5 years. It's not something I'd recommend to anyone. I'd hate to see it become a law, even over 10 years.

 

[teejayevans]

This won't affect the IRA's I inherited, but whoever gets my IRA's is screwed. I should have converted more in the down years, but hindsight and all that...

Screwed? No.
Someone is getting $ they didn’t earn.
They’ll have to pay more taxes on the money being given to them.
They’re not getting screwed, they are just not making out as much as before.
You can always refused or disclaim the inheritance, then you don’t have to pay any taxes. Problem solved.

 

[Helena]

.

Also, only the House version of the bill increases the RMD age to 72.

Hopefully, Senators will get on board and change their Senate version of the bill to match the House version... unless they prefer civilian life.

 

[statsman]

"Lawmakers in both the House and Senate are considering bipartisan bills aimed at making it easier for Americans to save for retirement."

Why do I think "making it easier" is just a ruse?

 

[USGrant1962]

.

Also, only the House version of the bill increases the RMD age to 72.

Hopefully, Senators will get on board and change their Senate version of the bill to match the House version... unless they prefer civilian life.

I kinda doubt that changing RMDs by 18 months (or not) is a big threat to a Senator's seat.

 

[Telly]

"Lawmakers in both the House and Senate are considering bipartisan bills aimed at making it easier for Americans to save for retirement."

Why do I think "making it easier" is just a ruse?

Many BOHICA-oriented bills have very positive, upbeat-sounding titles.

 

[RunningBum]

I kinda doubt that changing RMDs by 18 months (or not) is a big threat to a Senator's seat.

LOL, yeah, unless it's a one vote difference race in Helena's district, I don't see this being a factor.

 

[sheehs1]

Screwed? No.
Someone is getting $ they didn’t earn.
They’ll have to pay more taxes on the money being given to them.
They’re not getting screwed, they are just not making out as much as before.
You can always refused or disclaim the inheritance, then you don’t have to pay any taxes. Problem solved.

Well.... I see both points.
For anyone other than a spouse inheriting, I don't see a provision that provides for different taxation on earned income versus income from the inherited IRA.

For our sons and daughters inheriting, I am assuming any income they make on their own will be bumped into higher tax brackets by the 5 or 10 year payout of an inherited IRA. This may be a tax torpedo for them.

If this passes with the $400K limit...and a 5 year inherited payout then I will start to take distributions. I have more after tax liquid assets than deferred but I am still over that threshold on deferred as I am sure most of us are. Under 400K and they can stretch it...right?

 

[Helena]

I kinda doubt that changing RMDs by 18 months (or not) is a big threat to a Senator's seat.

For me, it's two years.

Two years make a big difference to me and probably to many others.

Today, I called my two Senators to let them know.

.

 

[bingybear]

I kinda doubt that changing RMDs by 18 months (or not) is a big threat to a Senator's seat.

In general killing the stretch IRA will have more long term effect.
For someone who might inherit a (stretch ) IRA with 1 or 2 mil, the death of the stretch would be a significant hit.

For me, it's two years.

Two years make a big difference to me and probably to many others.

Today, I called my two Senators to let them know.

.

However, we all look at how it affects us individually.

 

[RunningBum]

Has anyone besides Helena contacting their representatives about this?

 

[SecondCor521]

Has anyone besides Helena contacting their representatives about this?

I did. First time in my life.

 

[Helena]

In general killing the stretch IRA will have more long term effect.
For someone who might inherit a (stretch ) IRA with 1 or 2 mil, the death of the stretch would be a significant hit.

However, we all look at how it affects us individually.

I understand how the bill might negatively affect those who plan to leave a huge amount of their tax-deferred retirement funds as a legacy for their children.

However, the original intent of having a tax-deferred 401K/IRA and the intent of the bill is to help those who use those funds for their own retirement. Raising the RMD to age 72 does help those like me who are planning to use most of the funds for their own retirement.

.

 

[gwraigty]

I understand how the bill might negatively affect those who plan to leave a huge amount of their tax-deferred retirement funds as a legacy for their children.

However, the original intent of having a tax-deferred 401K/IRA and the intent of the bill is to help those who use those funds for their own retirement. Raising the RMD to age 72 does help those like me who are planning to use most of the funds for their own retirement.

.

Actually, it negatively affects the heirs, not those who are departing.

Because of my poor choice to elect RMDs over 5 years rather than my life expectancy (just wanted to get it over with at the time), we went from the 15% to the 25% tax bracket for those 5 years. What made it worse was that when I realized the ramifications of my decision, I called TDAmeritrade (my brokerage at the time where I'd opened the inherited IRA) to ask if I could change my election from 5 years to my life expectancy. It was shortly after I'd made the election (within a month or two) and I'd not yet taken my first RMD. It was still the same year my father had passed. That's how quickly I tried to "fix" things. Yet, I was told I couldn't change my mind. I have no idea if that was true or if someone was just being lazy. I was not in a frame of mind at the time to pursue the matter.

 

[sheehs1]

I understand how the bill might negatively affect those who plan to leave a huge amount of their tax-deferred retirement funds as a legacy for their children.

However, the original intent of having a tax-deferred 401K/IRA and the intent of the bill is to help those who use those funds for their own retirement. Raising the RMD to age 72 does help those like me who are planning to use most of the funds for their own retirement.

.

I think it is the elimination of the option to stretch inherited IRA's to those other than a spouse and possibly over the $400K limit that will affect those other than a spouse. Not everyone has a spouse. And those that are the 2nd parent to pass on presumably won't have one either. While some may plan to leave these to their children, there often is no one else to leave it to.

Upping the age to 72 for RMD's is just one piece of the proposed legislation.

Depending on one's own mix of tax deferred versus taxable liquid assets it seems this legislation inserts another planning caveat after we have spent decades planning with the rules that were in place for decades -basically my enter adult life.

I liked the stretch IRA route with the possibility of leaving it to children as it is (was?) an attractive mechanism to keep children from blowing that dough (granted if they choose to annuitize) and have something every year thru their own life expectancy.
So if this passes, I will try to lower the amounts in the tax deferred accounts first, allowing any inheritances to be in as many net tax dollars as possible. And I may stop contributing to the tax deferred accounts, something I have been considering for the last couple of years anyway.

While I am not in the camp that deferred everything possible, I can imagine how this might be shaking the thinking of those that did.
Oh well...it is what it is. Or should I say, it will be what it will be.