RMD going to 72?

[zinger1457]

Not a huge change but a bipartisan bill going through the house and senate would raise the RMD age to 72.


https://finance.yahoo.com/news/bipartisan-bills-aim-to-revamp-retirement-saving-125240433.html

The bill would raise the age at which people are required to take distributions from their retirement plan to 72, up from 70.5 years. It would also allow long-term part-time workers to participate in 401(k) plans.

 

[audreyh1]

I'd take it! Give us a couple more years to have lower taxes.

We'd be drawing SS anyway starting 70, so that will probably push us out of the 12% tax bracket already.

 

[RunningBum]

Yeah, I'll be drawing SS by 70 as well, so I'm not sure this does much for me, but some might appreciate the flexibility. I'm hoping to fully convert my tIRA before RMDs, and at first I thought this would give me another 18 months, but with SS income I don't see the advantage for myself.

 

[CRLLS]

I'll take it. That would give us a couple more years of Roth Conversions at lower taxes. Every little bit helps.

 

[38Chevy454]

I'll take it. That would give us a couple more years of Roth Conversions at lower taxes. Every little bit helps.

That's probably the biggest advantage if you have a large portion of pre-tax IRA funds.

 

[audreyh1]

I notice it doesn't say anything about any changes in the rate chart for how much you must withdraw annually by age.

 

[GrayHare]

I'm holding out for age 72.25.

 

[Huston55]

I notice it doesn't say anything about any changes in the rate chart for how much you must withdraw annually by age.

Is your thought that they’d chop off the first two ‘Distribution Periods’ and use the remainder of the age/rate chart?

 

[Golden sunsets]

That would be great for us. This is the year of the tax torpedo for us. I turned 70 this past 12/1 and started collecting SS on my own record. And this year, my RMD's kick in for me too, which in addition to increasing our taxes, will mean that we are once again subject to IRMAA, after a multi year reprieve since I retired. But I think I'd only be able to defer the dreaded RMD for one year, as I turn 72 next 12/1.

 

[Spock]

If I were emperor, remove RMDs for the original account holder and spouse. Any non-spouse heirs would be required to RMD based on the heirs age when they inherit it.

 

[CRLLS]

If I were emperor, remove RMDs for the original account holder and spouse. Any non-spouse heirs would be required to RMD based on the heirs age when they inherit it.

I'd vote for you.

 

[audreyh1]

Is your thought that they’d chop off the first two ‘Distribution Periods’ and use the remainder of the age/rate chart?

That would be my assumption as I think it's based on mortality rates or whatever you call it.

However, I don't believe the chart has been updated with current statistics, in other words it is quite outdated in terms of US longevity.

 

[Huston55]

That would be my assumption as I think it's based on mortality rates or whatever you call it.

However, I don't believe the chart has been updated with current statistics, in other words it is quite outdated in terms of US longevity.

That was my thought, that a new updated chart would be appropriate.

 

[steelyman]

That table has the same entry for age 70 (27.4) that I used back in 2015 or so when doing some projections involving RMDs.

 

[CRLLS]

Is your thought that they’d chop off the first two ‘Distribution Periods’ and use the remainder of the age/rate chart?

That would be correct IMO. I don't think they are updating life expectancy. The actual text of the bill reads with respect to the RMD's, in part:

ACTUARIAL ADJUSTMENT.—Section 401(a)(9)(C)(iii) of such Code is amended by striking ‘‘age 70 1⁄2’’ each place it appears and inserting ‘‘age 72’’.

Unfortunately those who already have met age 70-1/2 do not get to reset the clock.

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to distributions required to be made after December 31, 2019, with respect to individuals who attain age 70 1⁄2 after such date.

 

[audreyh1]

That table has the same entry for age 70 (27.4) that I used back in 2015 or so when doing some projections involving RMDs.

I think it's at least 10 years old. Maybe way older. I have seen the same numbers for a loooooong time.

OK - it looks like the chart was last updated in 2002.

 

[RE2Boys]

I sure hope it passes as it sounds custom tailored for me. I turn 70 late December this year. I sure would like two more years to do more conversions now that I've resigned all seasonal part time gigs.

 

[Car-Guy]

That's good (not great) news. (If they don't up the RMD % at 72) Personally I rather see them eliminate RMD's altogether. Just pay the taxes when it's taken out by you or your heirs.

Or even better, just eliminate the tax altogether. (Which would have been a good April Fools joke if I were posting this yesterday.)

 

[W2R]

For me, it would not have made the slightest difference. I was withdrawing an amount equivalent to an RMD from my TSP when I was retired but only in my 60's. Thus I was leaning more heavily on the TSP and more lightly on taxable for my living expenses, than I otherwise might have done.

The objective was to lower my TSP balance at least a little bit to help deal with the upcoming "tax torpedo" when I turned 70 and started getting higher SS plus RMD's. It worked. Even so, the tax torpedo was awful enough! I can't imagine the tax hit I would have taken, had I not done this in advance.

Now that I am 70 (soon to be 71), if they change the RMD age, so what. I will just continue withdrawing as always.

 

[steelyman]

I think what I’m doing is similar to W2R’s approach. Taking withdrawals now although the IRS-mandated withdrawal is still a way off. The denominator I use is derived from their table but adjusted forward and lowered by 1 each year, which means a gradual raise in portfolio percentage withdrawn. It’s an individual decision.

The result is a very small fraction (compared to 4%). I don’t expect much from SS and don’t think I’ll have a big tax torpedo. Changes in age don’t affect the approach much if at all unless they radically change the actuarial life expectancies.

[ADDED] I wonder what effect this has on QCD (qualified charitable distributions). It would seem to delay their use.

 

[GrayHare]

What is the projected impact of such a change on government revenues? Less incoming tax because people will delay RMDs and their tax? Or more incoming tax because people will convert more tIRA dollars to Roth?

 

[Andre1969]

I guess this is a good thing. But, I was planning to start pulling a little bit out of my IRAs once I hit 59.5, to reduce the impact a bit, of when the RMDs actually kick in.


I'm only 49, and still w*rking, so even 59.5 is still a bit of a way off, let alone 70.5 (or 72).

 

[audreyh1]

I think chances are very high this will pass because the White House also wants it.

Gosh - this would delay DH's RMDs for two years and mine for one. We're still >5 years out even with the 70 1/2 rule.

 

[kgtest]

Or even better, just eliminate the tax altogether. (Which would have been a good April Fools joke if I were posting this yesterday.)

I would definitely vote for you

 

[RunningBum]

What is the projected impact of such a change on government revenues? Less incoming tax because people will delay RMDs and their tax? Or more incoming tax because people will convert more tIRA dollars to Roth?

I'd say slightly less govt revenue from taxes. Some will convert what they would've had to have taken as an MRD, which has zero change, except that future income from extra funds now in a Roth is never taxed. If you were going to convert over the top of the MRD you would still probably convert that same amount.

Others will simply not take anything until 72 and not convert, so that's a delay in getting the tax money. Eventually they will get it from you or your heirs. Any delay in getting tax revenue is not really favorable to the government.