RMD going to 72?

[gerntz]

If you expect you'll pass from this planet with a good deal of assets still remaining in your IRA(s), and the 10 years to distribute all of that to beneficiaries applies, then having many beneficiaries vs. just one could reduce their collective total income taxes on those assets by each having less income from the distributions and likely being in a lower income tax bracket.

Additionally, if you don't leave your IRA's to your spouse, then when one of you dies, the 10 years distribution period starts on that partner's IRA while the other is delayed. This means the distributions are further spread out/lower income taxes. Come to think of it, this is a good reason for legal polygamy.

 

[FIREchief]

Has anybody seen any reports of this legislation still having life? It's gone from reports of "highly popular and likely to pass by unanimous consent" to dead silence.

 

[MichaelB]

Has anybody seen any reports of this legislation still having life? It's gone from reports of "highly popular and likely to pass by unanimous consent" to dead silence.

That’s normal, and the most common outcome of legislation.

 

[Kwirk]

https://www.planadviser.com/exclusives/secure-act-ensnared-senate-flying-house/

Found on Google search. I can't speak to reliability of the information.

 

[gerntz]

Has anybody seen any reports of this legislation still having life? It's gone from reports of "highly popular and likely to pass by unanimous consent" to dead silence.

WSJ today:

"Like grave robbers opening King Tut’s tomb, Congress can’t wait to get its hands on America’s retirement-account assets. The House passed the Setting Every Community Up for Retirement Enhancement Act, known by the acronym Secure, in May......The Secure Act is widely expected to pass the Senate by unanimous consent."

"In exchange for its windfall under the Secure Act, Congress will push back the age at which retirees must take their first required minimum IRA distributions from 70½ to 72. This isn’t the deal American savers were promised when they made contributions to their IRAs the last 20 years."

"Ted Cruz of Texas is the Senate’s main holdout against the Secure Act."

Behind pay wall: https://www.wsj.com/articles/congress-is-coming-for-your-ira-11562713559

 

[MichaelB]

WSJ today:

"Like grave robbers opening King Tut’s tomb, Congress can’t wait to get its hands on America’s retirement-account assets. The House passed the Setting Every Community Up for Retirement Enhancement Act, known by the acronym Secure, in May......The Secure Act is widely expected to pass the Senate by unanimous consent."

"In exchange for its windfall under the Secure Act, Congress will push back the age at which retirees must take their first required minimum IRA distributions from 70½ to 72. This isn’t the deal American savers were promised when they made contributions to their IRAs the last 20 years."

"Ted Cruz of Texas is the Senate’s main holdout against the Secure Act."

Behind pay wall: https://www.wsj.com/articles/congress-is-coming-for-your-ira-11562713559

That’s an opinion piece by a guest writer and makes no comment about the current status of the legislation in the Senate.

 

[Gumby]

If you go to www.Congress.gov you can see the status of any current bill. The SECURE Act is H.R.1994. You can even sign up for status notifications.

 

[FIREchief]

If you go to www.Congress.gov you can see the status of any current bill. The SECURE Act is H.R.1994. You can even sign up for status notifications.

Yep. I found this:

Latest Action: Senate - 06/03/2019 Received in the Senate.

That sure helps!!

 

[Gumby]

That is the current operative fact. Speculation as to why it does not say "approved by senate" is really of no use to me. It will or it won't; that's the only thing I need to know.

 

[gerntz]

What does this mean, if anything:

https://www.plannedgiftdesign.com/uploads/2/4/6/6/24661337/volume_two_number_ten.pdf

 

[RunningBum]

What does this mean, if anything:

https://www.plannedgiftdesign.com/uploads/2/4/6/6/24661337/volume_two_number_ten.pdf

It's 6 pages long and seems to be a re-hash of the bill that has not yet become law. It's from a tax attorney in a newsletter. Is there something specific you are wondering about? I only scanned it but didn't see anything that hasn't already been covered here. Could have missed it but I'd rather put it back on you to ask what you are looking for.

 

[gerntz]

The point I think I saw & hadn't read, missed maybe, is that the 10 year distribution may not apply to beneficiaries of less than $400K.

 

[CardsFan]

The point I think I saw & hadn't read, missed maybe, is that the 10 year distribution may not apply to beneficiaries of less than $400K.

Two different bills. The House bill, which has passed the house is, 10 years, but does not exclude the $400k or under. The Senate bill, which I don't think has been voted on, is 5 years, with the $400k exclusion.

If it goes to conference, who knows what might come out.

If/when something is passed, we will need to look at increasing Roth conversions, if it makes sense.

 

[RunningBum]

The point I think I saw & hadn't read, missed maybe, is that the 10 year distribution may not apply to beneficiaries of less than $400K.

That has been discussed here already. That limit is in the Senate bill, not the house bill that passed. The differences would have to be resolved before it becomes law.

 

[pb4uski]

The point I think I saw & hadn't read, missed maybe, is that the 10 year distribution may not apply to beneficiaries of less than $400K.

My understanding was that the first $400k per IRA owner (IRAs aggregated) was exempt, not per beneficiary.

 

[FIREchief]

My understanding was that the first $400k per IRA owner (IRAs aggregated) was exempt, not per beneficiary.

Yes. This is the first time I've seen a writer suggest that the $400K limit would apply to each beneficiary, not the total to all beneficiaries. From a practical standpoint, I don't see how it could be divided among all beneficiaries. Consequently, the whole thing doesn't make much sense (not a big surprise in Washington). If I have a $4M IRA and I divide it equally among two children, two children's spouses and 6 Grandchildren; then they all can use a lifetime stretch. Just two children, and each has to withdraw 80% within five years. Yikes.

 

[ncbill]

Yes. This is the first time I've seen a writer suggest that the $400K limit would apply to each beneficiary, not the total to all beneficiaries. From a practical standpoint, I don't see how it could be divided among all beneficiaries. Consequently, the whole thing doesn't make much sense (not a big surprise in Washington). If I have a $4M IRA and I divide it equally among two children, two children's spouses and 6 Grandchildren; then they all can use a lifetime stretch. Just two children, and each has to withdraw 80% within five years. Yikes.

I can think of ways to get around that $400k limit.

E.g. a caregiver for an elderly parent and has POA control over their financial affairs, with the caregiver sole beneficiary of a $600k IRA.

What stops them from immediately moving half of that IRA to another custodian so that when the parent dies the inheritor can stretch the full $600k over their lifetime?

 

[SecondCor521]

I can think of ways to get around that $400k limit.

E.g. a caregiver for an elderly parent and has POA control over their financial affairs, with the caregiver sole beneficiary of a $600k IRA.

What stops them from immediately moving half of that IRA to another custodian so that when the parent dies the inheritor can stretch the full $600k over their lifetime?

IRS rules and a chance of being convicted of criminal fraud. The IRS has long considered multiple IRAs owned by the same person (and of the same type) to be treated for tax purposes as one large IRA. I'm quite confident that the new law treats separate IRAs owned by the same person in a similar fashion for purposes of assessing the $400K limit.

The only strategy I've seen so far that might "work" is distributing the IRA across more and/or younger beneficiaries to lessen the tax hit each one takes.

 

[pb4uski]

.... What stops them from immediately moving half of that IRA to another custodian so that when the parent dies the inheritor can stretch the full $600k over their lifetime?

Because the $400k exemption is per owner, not per account.

Admittedly, enforcement may be difficult but anyone that plays games is taking on a lot of risk of penalties and interest and possibly fraud... and they throw people in jail for that.

 

[ncbill]

Because the $400k exemption is per owner, not per account.

Admittedly, enforcement may be difficult but anyone that plays games is taking on a lot of risk of penalties and interest and possibly fraud... and they throw people in jail for that.

It may be a moot point anyway...how many really inherit IRAs worth over $400k?

 

[CardsFan]

It may be a moot point anyway...how many really inherit IRAs worth over $400k?

Well, there is a pretty good chance our DS will inherit one 3-5 times that value.

There may not be "many" but there are a lot of bucks to be taxed. In any event, the tax man cometh. If my biggest problem is my son needed to pay huge taxes on what we left him, then life is pretty good all around.

 

[FIREchief]

Admittedly, enforcement may be difficult but anyone that plays games is taking on a lot of risk of penalties and interest and possibly fraud... and they throw people in jail for that.

I think enforcement would be exceedingly simple. Wouldn't the Form 5498's that each custodian sends to the IRS be sufficient to lock up ncbill rather quickly? (I don't really know - I'm assuming that custodians of inherited IRAs report annual status to the IRS similar to how other IRAs are reported)

 

[FIREchief]

It may be a moot point anyway...how many really inherit IRAs worth over $400k?

Apparently there are enough instances that our legislators have decided it is a worthwhile (potential) revenue generator (Mr. Cruz apparently excluded ).

 

[CRLLS]

I prefer to read the actual bills rather than read someone's summary of them. Is the latest RESA (Senate bill) S.972 - Retirement Enhancement and Savings Act of 2019?

https://www.congress.gov/bill/116th...nhancement+and+Savings+Act+of+2019"]}&r=2&s=2

I states $400K "per beneficiary" , a change from last year's bill of $450k in the employees' combined total of his defined contribution 401 Accounts. Further, the 400K applies to Defined Contribution Accounts and Plans, not IRA's from what I read.

About that $400K and beneficiaries:

“(i) IN GENERAL.—In the case of distributions from a defined contribution plan, a trust forming part of such plan shall not constitute a qualified trust under this section unless the plan provides that, if an employee dies before the distribution of the employee’s interest (whether or not such distribution has begun in accordance with subparagraph (A)), so much of the entire interest of any designated beneficiary of the employee as exceeds $400,000 (as of the date of the death of the employee) will be distributed within 5 years after the death of such employee.

Bold is my highlight.

A lot needs to be done to consolidate the 2 bills. We can expect that a lot of fine detail changes will be made along the way, if it gets passed at all.

 

[audreyh1]

Is this going anywhere or is one senator still sitting on it?