Join Early Retirement Today
Closed Thread
 
Thread Tools Display Modes
Senate Finance Committee Approves Bipartisan Pension Bills
Old 10-04-2016, 08:56 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Big_Hitter's Avatar
 
Join Date: May 2013
Location: Les Bois
Posts: 5,761
Senate Finance Committee Approves Bipartisan Pension Bills

http://www.groom.com/media/publicati...on%20Bills.pdf

Good read. Take note that one of the rules changes stretch iras, which may affect many on the forum:

"Post-Death Required Minimum Distribution Rules (“Stretch IRAs”). Current post-death required minimum distribution (“RMD”) rules generally provide that if an employee or IRA owner dies before the required beginning date and has a designated beneficiary, RMD distributions are permitted to be paid over the designated beneficiary’s life expectancy. RESA would change the post-death RMD rules to generally require that all distributions after death (including to a designated beneficiary) be made by the end of the fifth calendar year following the year of death – a significant revenue raiser. The requirement does not apply if the designated beneficiary is an eligible beneficiary, which is defined as any beneficiary who, as of the date of death, is a surviving spouse, disabled, or chronically ill, or is an individual who is not more than 10 years younger than the employee (or IRA owner), or is a child of the employee (or IRA owner) who has not reached the age of majority. In addition, RESA would provide that the new 5-year distribution requirement only applies to the extent that the amount of an individual’s aggregate account balances under all IRAs and defined contributions plans, determined as of the date of death, exceeds $450,000 (indexed for inflation).
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
Big_Hitter is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-04-2016, 10:11 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: St. Charles
Posts: 3,903
Quite a money grab! At least the spouse is protected. Also, am I correct that this only applies if the owner dies before RMD's kick-in? What happens if RMD's are already being taken? I am still 9 years from RMD's, so I have not looked at this too carefully, but it sounds like I need to consider this for estate planning. One more reason to do Roth roll-overs
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
CardsFan is offline  
Old 10-04-2016, 10:20 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Big_Hitter's Avatar
 
Join Date: May 2013
Location: Les Bois
Posts: 5,761
yeah this is a big deal - looks like it also applies to monies left in a 401k/ps plan
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
Big_Hitter is offline  
Old 10-04-2016, 10:58 AM   #4
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Location: Nashville
Posts: 2,504
I see no specific reference to Roth IRA's in either the Groom analysis or the Chairman's markup of the Bill. Am I missing something--or is the present rule of RMD based on Roth beneficiary's life expectancy unaffected?
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline  
Old 10-04-2016, 11:12 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Sep 2013
Location: Ventura County
Posts: 1,432
Quote:
Originally Posted by 2017ish View Post
I see no specific reference to Roth IRA's in either the Groom analysis or the Chairman's markup of the Bill. Am I missing something--or is the present rule of RMD based on Roth beneficiary's life expectancy unaffected?
Since Roth's aren't subject to RMDs maybe it doesn't apply.
stepford is offline  
Old 10-04-2016, 12:25 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ExFlyBoy5's Avatar
 
Join Date: May 2013
Location: ATL --> Flyover Country
Posts: 6,649
Wow. Now THAT is some news. I wonder if the media will pre-empt Kardashian coverage for this?
__________________
FIRE'd in 2014 @ 40 Years Old
Professional Retiree
ExFlyBoy5 is offline  
Old 10-04-2016, 12:27 PM   #7
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,302
Quote:
Originally Posted by ExFlyBoy5 View Post
Wow. Now THAT is some news. I wonder if the media will pre-empt Kardashian coverage for this?
Of course not, silly. Why would TV programmers think that potential legislation that would seriously affect the retirement plans of millions of people be more important than the Kardashians?
__________________
When I was a kid I wanted to be older. This is not what I expected.
Walt34 is offline  
Old 10-04-2016, 12:32 PM   #8
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 17,773
I think this legislation is fair--the spouse and minor and disabled children are still protected, I believe?
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline  
Old 10-04-2016, 12:34 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ExFlyBoy5's Avatar
 
Join Date: May 2013
Location: ATL --> Flyover Country
Posts: 6,649
Quote:
Originally Posted by Walt34 View Post
Of course not, silly. Why would TV programmers think that potential legislation that would seriously affect the retirement plans of millions of people be more important than the Kardashians?
I think because as soon as the anchor muttered the words, "A congressional committee has...", they will flip the TV immediately to "Entertainment Tonight" or "The Real Housewives of **INSERT ANY CITY HERE**."

Anyway, this could *really* affect my taxable income if/when my Dad dies. He has a sizable nest egg and as I read this, I would be subject to some VERY hefty taxes for a 5 year period. I know some folks would argue, "Well, that's a good problem to have!" but it still seems like money grab to me.

Quote:
Originally Posted by Bestwifeever View Post
I think this legislation is fair--the spouse and minor and disabled children are still protected, I believe?
Without getting political, I am not sure I would look at this as fair. If my Dad died today, the taxes would be spread out for about 40 years. With this proposal, that would be 5 years. On a hypothetical $1,000,000 balance (which isn't a large amount, really) that means instead of taking a RMD of $25,000, it would now be $200,000!!! That's 8x the amount under the current law, and it would result in a significant tax penalty.
__________________
FIRE'd in 2014 @ 40 Years Old
Professional Retiree
ExFlyBoy5 is offline  
Old 10-04-2016, 12:39 PM   #10
Moderator
Walt34's Avatar
 
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,302
Quote:
Originally Posted by ExFlyBoy5 View Post
Anyway, this could *really* affect my taxable income if/when my Dad dies. He has a sizable nest egg and as I read this, I would be subject to some VERY hefty taxes for a 5 year period. I know some folks would argue, "Well, that's a good problem to have!" but it still seems like money grab to me.
You and lots of other people would be affected and it does seem like a money grab. But other than writing to my congresscritter there isn't a thing I can do about it so I'm not going to worry about it.
__________________
When I was a kid I wanted to be older. This is not what I expected.
Walt34 is offline  
Old 10-04-2016, 12:43 PM   #11
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 17,773
I never felt the legislation was meant to benefit the heirs and shelter taxes in perpetuity, but obviously others have other feelings. Carry on.
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline  
Old 10-04-2016, 12:45 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ExFlyBoy5's Avatar
 
Join Date: May 2013
Location: ATL --> Flyover Country
Posts: 6,649
Quote:
Originally Posted by Walt34 View Post
You and lots of other people would be affected and it does seem like a money grab. But other than writing to my congresscritter there isn't a thing I can do about it so I'm not going to worry about it.
That is quite true. My Dad often complains about the ills of the world and I constantly tell him that there isn't a damn thing he really can do about it and to essentially, "get over it." I suppose I should take my own advice.
__________________
FIRE'd in 2014 @ 40 Years Old
Professional Retiree
ExFlyBoy5 is offline  
Old 10-04-2016, 12:47 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ExFlyBoy5's Avatar
 
Join Date: May 2013
Location: ATL --> Flyover Country
Posts: 6,649
Quote:
Originally Posted by Bestwifeever View Post
I never felt the legislation was meant to benefit the heirs and shelter taxes in perpetuity, but obviously others have other feelings. Carry on.
Under the current rules, the taxes WILL be paid (albeit over a longer period) so they are not sheltered in perpetuity.
__________________
FIRE'd in 2014 @ 40 Years Old
Professional Retiree
ExFlyBoy5 is offline  
Old 10-04-2016, 01:01 PM   #14
Thinks s/he gets paid by the post
GTFan's Avatar
 
Join Date: Apr 2013
Location: Ormond Beach
Posts: 1,407
But her comment is valid - the 401ks/IRAs were really intended for one lifetime, not two.

I have no issue with acceleration of distros to children. But then again I've never been in favor of leaving large legacies. I can see where it could be a burden with an unexpectedly early demise however.
GTFan is offline  
Old 10-04-2016, 01:14 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
Quote:
Originally Posted by ExFlyBoy5 View Post
With this proposal, that would be 5 years. On a hypothetical $1,000,000 balance (which isn't a large amount, really) that means instead of taking a RMD of $25,000, it would now be $200,000!!! That's 8x the amount under the current law, and it would result in a significant tax penalty.
It's bad, but maybe not quite as bad as that. From the OP:
Quote:
In addition, RESA would provide that the new 5-year distribution requirement only applies to the extent that the amount of an individual’s aggregate account balances under all IRAs and defined contributions plans, determined as of the date of death, exceeds $450,000 (indexed for inflation).
So, it looks like "only" the money over $450K would need to be distributed over 5 years. (I guess $450K is the new government definition for "rich?" All take note of that. Where did that number come from?). Also, it's not clear to me if "an individual" refers to the decedent or the beneficiary(ies). If the money is being divided among a bunch of heirs and the dispersal reqmt applies to recipients, then maybe quite a bit could be shielded under the $450K priviso.

Maybe there's room for some crafty use of trusts here. Or continued conversions into Roths well into retirement for the benefit of the kiddies.
samclem is offline  
Old 10-04-2016, 01:16 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ExFlyBoy5's Avatar
 
Join Date: May 2013
Location: ATL --> Flyover Country
Posts: 6,649
Quote:
Originally Posted by GTFan View Post
But her comment is valid - the 401ks/IRAs were really intended for one lifetime, not two.

I have no issue with acceleration of distros to children. But then again I've never been in favor of leaving large legacies. I can see where it could be a burden with an unexpectedly early demise however.
I will agree with this to point, but I don't think that a value of $450,000 is what I would consider a "large legacy." Also, if it "was intended for one lifetime, not two", then why allow it to be inherited at ALL? Just give it to the government. And in my defense, she used the word "perpetuity" which is defined as "FOREVER"...there isn't any gray area in that definition.

This is a very touchy subject (obviously), so for the best interest to all those in the forum, I am going to kindly bow out now.
__________________
FIRE'd in 2014 @ 40 Years Old
Professional Retiree
ExFlyBoy5 is offline  
Old 10-04-2016, 01:17 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: St. Charles
Posts: 3,903
One could argue that the government is "entitled" to the taxes as if the owner lived to collect. According to this: https://www.ssa.gov/oact/STATS/table4c6.html it appears the life expectancy for a 70yo is about 15 years.

So, requiring the distributions to be taken over 15 years would be reasonable. 10 might be OK. 5 sounds like it is intentionally written to drive the inheritors of large accounts into high tax brackets, so that even more is collected than the owner would have paid.

Another option would be to tax the distributions at a set rate (15%?, 20%?). This could actually encourage inheritors to cash out early (since there is no benefit for waiting), which is the main goal of the legislation.

In any event, while this could impact a large number of folks on this forum, it would likely impact only a small fraction of the general population.
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
CardsFan is offline  
Old 10-04-2016, 01:18 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
Quote:
Originally Posted by GTFan View Post
But her comment is valid - the 401ks/IRAs were really intended for one lifetime, not two.
?? Nobody knows what the "intent" was. It >clearly< allowed for the money to be spread beyond one lifetime, the spouse rules were never in doubt. The law was written as it was, and changing it now changes the rules for those who invested the money in a certain way because of a government promise. Changing the rules midstream is, on its face, unfair. Those who disagree will be in no position to argue when their Roth's get taxed (or, more likely, "back door taxed" by increasing the taxed portion of SS and the tax rate on other investments due to Roth withdrawals. Technically, the Roth withdrawals aren't directly taxed, but every dime withdrawn from Roth's would increase the tax bill . . .)
samclem is offline  
Old 10-04-2016, 01:25 PM   #19
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,590
All of a sudden we're speculating on the new definition of wealthy and ROTH IRA's being taxed. Why not just stick to discussing the bill?
MichaelB is online now  
Old 10-04-2016, 02:11 PM   #20
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 3,877
I can already hear the sound of annuities being purchased inside IRAs.
GrayHare is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Employment Finance vs Early Retirement Finance truenorth418 Life after FIRE 12 12-16-2015 12:18 PM
Steal from the rich - God approves! Trek Other topics 0 12-22-2009 01:49 PM
The Three Stooges appear before the senate banking committee---wooowooowoo cashflo2u2 FIRE and Money 64 11-22-2008 10:08 AM
Congress Approves Changes to HSA Rules for 2007 mykidslovedogs Health and Early Retirement 2 12-20-2006 05:38 PM
Senate Armed Services Committee hooks up the flag officers Nords Other topics 2 10-18-2006 06:47 PM

» Quick Links

 
All times are GMT -6. The time now is 08:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.