SECURE Act - your thoughts

[audreyh1]

Will the RMD distribution table simply shift downwards by 2 years, or the divisors might have new but small changes?

From what I understand, the divisors might have new but small changes because they updated the tables for current life expectancy.

 

[audreyh1]

The lifespan will remain the same, which means I expect the withdrawal percentage will be a little higher.

I turn 70 May, 2020, and this will divert the RMD's for me 2 years. Fortunately our lifestyle doesn't require any withdrawals at this time.

No, the lifespan has changed and been updated. Lifespan for the average 65 year old has increased about 1.5 years from 2002 to 2017. IRS was going to change the tables in 2021 anyway to reflect this longer lifespan.

 

[Aerides]

We have a current thread on this topic, so I will merge it with that.

 

[FIREchief]

Trump just signed the defense spending bill during a military ceremony at Andrews base [it was on C-Span.] Not sure if he has signed the other part of the spending bill ??

He has three more hours, so I suspect he's signed it but nothing will be announced. This is just politics. Defense spending good. Domestic spending bad.

 

[anethum]

Do you have a reference for this? I haven’t been able to find one.

On page 695, I found the following regarding reducing the medical deduction threshold from 10% to 7.5% for tax years 2019 & 2020:

SEC. 103. REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR. (a) INGENERAL.—Section 213(f) is amended to read as follows: ‘‘(f) TEMPORARYSPECIALRULE.—In the case of taxable years beginning before January 1, 2021, subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’.’’. (b) ALTERNATIVEMINIMUMTAX.—Section 56(b)(1) is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), (E), and (F), as subparagraphs (B), (C), (D), and (E), respectively. (c) EFFECTIVEDATE.—The amendments made by this section shall apply to taxable years ending after December 31, 2018.

 

[Alexi]

He has three more hours, so I suspect he's signed it but nothing will be announced. This is just politics. Defense spending good. Domestic spending bad.

lol

So true!

Trump sat down and signed something, then he stood up and ceremonially handed it to someone. Then he immediately sat down again and signed something else while mentioning how big it is. I wondered if the first was military spending and the second was domestic spending.

 

[RobbieB]

Big, really big.

 

[FIREchief]

Big, really big.

Biggly!!!

 

[Gumby]

Let's all reflect on how useful this thread is and avoid doing things that could lead to its closure. Thank you.

 

[Sunset]

What this is going to do for/to me, is to cause me to increase my number of IRA heirs. That way the amount any one person might receive will be lower & thus the increase in each's income & possibly tax rate will be lower.

Feel free to put me on that list

 

[target2019]

All spending is good. It's the season of giving, right? Or is it the season of forgiving?

We'll just have to sit and enjoy the RMD being pushed back two years. And the year after we'll pay higher Fed Tax rates.

All of this triggers necessary programming updates for the various planning tools. A mixed blessing, of sorts.

 

[Dash man]

On page 695, I found the following regarding reducing the medical deduction threshold from 10% to 7.5% for tax years 2019 & 2020:



SEC. 103. REDUCTION IN MEDICAL EXPENSE DEDUCTION FLOOR. (a) INGENERAL.—Section 213(f) is amended to read as follows: ‘‘(f) TEMPORARYSPECIALRULE.—In the case of taxable years beginning before January 1, 2021, subsection (a) shall be applied with respect to a taxpayer by substituting ‘7.5 percent’ for ‘10 percent’.’’. (b) ALTERNATIVEMINIMUMTAX.—Section 56(b)(1) is amended by striking subparagraph (B) and by redesignating subparagraphs (C), (D), (E), and (F), as subparagraphs (B), (C), (D), and (E), respectively. (c) EFFECTIVEDATE.—The amendments made by this section shall apply to taxable years ending after December 31, 2018.

That helps us! Thank you!!

 

[38Chevy454]

Just a question here. Since many are looking at increasing the Roth conversions to avoid the inherited 10 year mandatory withdrawal, isn't this in effect sort of accomplishing the same thing as what the gov't wants? To get the tax money from the pre-tax accounts?
Sure the amount of conversion percentage may be less than the RMD amounts, especially if you are doing conversions up to a tax rate limit. But in the end, what Uncle Sam wants is more tax revenue to be received out of the pre-tax accounts sitting there accumulating value and not being taxed.
I am not disagreeing with the plan to do Roth conversions, I think it can save tax money if done smart and with respect to tax rates paid now vs potential tax rates of beneficiaries.

 

[pb4uski]

+1 Same principle as doing aggressive Roth conversions to help surviving spouse being vaulted into a higher tax bracket... but now extend for heirs are still owrking and additional income from inherited IRAs will vault them into a higher tax bracket.

 

[target2019]

Just a question here. Since many are looking at increasing the Roth conversions to avoid the inherited 10 year mandatory withdrawal, isn't this in effect sort of accomplishing the same thing as what the gov't wants? To get the tax money from the pre-tax accounts?
Sure the amount of conversion percentage may be less than the RMD amounts, especially if you are doing conversions up to a tax rate limit. But in the end, what Uncle Sam wants is more tax revenue to be received out of the pre-tax accounts sitting there accumulating value and not being taxed.
I am not disagreeing with the plan to do Roth conversions, I think it can save tax money if done smart and with respect to tax rates paid now vs potential tax rates of beneficiaries.

We were always looking towards converting a pile of 25% tax postponed money to 15% tax paid Roth. The goal posts are moved now, and it's ok to consider other strategies, and include other goals (like passing it on). The variable array keeps expanding, for sure. Many opinions on this situationr, and I am greatful for all of the discussion. I pick up at least one new idea from every thread, it seems.

 

[HFWR]

My DS’s problem... [emoji56]

 

[audreyh1]

My DS’s problem... [emoji56]

Yes, I don’t feel compelled to pre-pay taxes for our heirs. I can almost guarantee that our tax rate is and will be higher even though we are retired. Plus chances are very good that they will already be retired by the time they receive an IRA inheritance. Two will be subject to the 10 year rule on DH’s IRA. On mine everyone is less than 10 years younger.

 

[hulurt1]

Will the age of 72 start at as if you were taking RMD at 72 or will it start as if taking it at 70? My RMD goes up about 6000 every year under the old law. At 75 its up 20000 from 70 years old.

 

[Golden sunsets]

Help anybody. Where can I find the text of this law? I used the link in Post #104 and it didn't seem to pertain to this law at all??

Thanks in advance.

 

[bingybear]

Yes, I don’t feel compelled to pre-pay taxes for our heirs. I can almost guarantee that our tax rate is and will be higher even though we are retired. Plus chances are very good that they will already be retired by the time they receive an IRA inheritance. Two will be subject to the 10 year rule on DH’s IRA. On mine everyone is less than 10 years younger.

So what would you recommend for your heirs? or someone like them?


If your TIRA is large an your heir's had somewhat large TIRA's and other assets


I'd assume you answer would vary based on timing. When do your heirs start their own RMD compared to inheritance timing. Or if they even have a clue if it is coming.


what would you recommend?

 

[Alexi]

We'll just have to sit and enjoy the RMD being pushed back two years. And the year after we'll pay higher Fed Tax rates.

No need to wait until age 72 to take money out of a traditional IRA.

I've been taking money out of mine for many years to take advantage of a lower tax rate.

 

[Alexi]

Just a question here. Since many are looking at increasing the Roth conversions to avoid the inherited 10 year mandatory withdrawal, isn't this in effect sort of accomplishing the same thing as what the gov't wants? To get the tax money from the pre-tax accounts?

Sure the amount of conversion percentage may be less than the RMD amounts, especially if you are doing conversions up to a tax rate limit. But in the end, what Uncle Sam wants is more tax revenue to be received out of the pre-tax accounts sitting there accumulating value and not being taxed.

I am not disagreeing with the plan to do Roth conversions, I think it can save tax money if done smart and with respect to tax rates paid now vs potential tax rates of beneficiaries.

Good point.

Since Roth conversions are popular while benefiting government revenue, maybe in the future government will change Roth rules to try to squeeze out even more tax revenue. This is one reason why I have never made a Roth conversion.

 

[Sunset]

Good point.

Since Roth conversions are popular while benefiting government revenue, maybe in the future government will change Roth rules to try to squeeze out even more tax revenue. This is one reason why I have never made a Roth conversion.

While the gov't can make any rules they want, Roth money already had taxes paid on it, just like a regular savings account or regular brokerage account, or a paycheck.
So unless the gov't wants to tax TWICE, what rule would they make ??

 

[aja8888]

While the gov't can make any rules they want, Roth money already had taxes paid on it, just like a regular savings account or regular brokerage account, or a paycheck.
So unless the gov't wants to tax TWICE, what rule would they make ??

I suppose they could tax the "untaxed earnings" in the Roth if they so desired.

 

[Alexi]

On my wish list is changing the law to at least double the income threshold [which was never indexed for inflation] when Social Security income becomes taxable and index it for inflation.