EO to Raise RMD Age ?!

[Yarnstormer]

This is probably prep for raising full ss and medicare age as well.

 

[pb4uski]

I answered that in my last post.

I have planned very carefully and am able to take thousands out of my traditional IRA every year tax free because I stay under the IRS tax threshold. I will continue to do that until age 70 when the government FORCES me to take out MORE each year than I need or want. In other words, the RMD government mandate only benefits the government.

Whoa... hold on a minute so I can go get my violin to play a song for you. The whole deal was that if you saved for retirement that the government would DEFER the tax on any earnlngs that you saved... they kept their part of the deal and now you resent having to pay taxes on it Tough sh!t. They never said it would be tax free and the deal was crystal clear. Get over it. Pigs get fat and hogs get slaughtered... don't be a hog.

 

[street]

^ we all know we have to pay taxes on this money. If they take a look at life expectance now it maybe that we add a year or so before RMD starts. It would be nice also if they lowered the % at that time we have to start taking it out.

If heirs have to take bigger chunk and pay a higher tax that maybe an option also.

I see nothing wrong with taking a look and if they can improve it that would be a good thing. Taxes will be paid on this money regardless we all know that.

 

[target2019]

This is probably prep for raising full ss and medicare age as well.

Carrot, followed by stick.

 

[joeea]

How many people would this actually affect given the small numbers that have actually saved enough for retirement. Then factor in the even smaller number of those who don't need the money due to other sources of income.

Clearly this will more positively affect the more wealthy among us.

How will this help the government budget? What is the upside for it? Seems to me they have something up their sleeves.

Certainly it will reduce tax money flowing to the government.

That will increase the deficit yet again. And then the deficit hawks can clamor louder for reductions to social security, medicare, and any entitlement programs.

So lets' see - who will be the winners in this scenario, and who will be the losers? Are they the same folks as the last round of deficit increases via tax rate reductions? I think so.

At least for now, this is an "executive order to look into the situation". Perhaps Congress will look into it too.

 

[Huston55]

I turned 70 1/2 six weeks ago, so this is my first RMD year.

Doesn’t that mean next year is your first RMD year?

 

[aaronc879]

Doesn’t that mean next year is your first RMD year?

No, your first RMD year is the year you turn 70 1/2. Technically that first year you CAN wait until the tax deadline the following year(approx. Apr 15th) but then you would have to take out two years worth in one year which is not likely to be in your best interest in terms of taxes.

 

[MichaelB]

From the IRS https://www.irs.gov/retirement-plan...qs-regarding-required-minimum-distributions#3

When must I receive my required minimum distribution from my IRA?

You must take your first required minimum distribution for the year in which you turn age 70½. However, the first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.

 

[donheff]

I just turned 70 so RMDs will start in 2019. I see no advantage in waiting until April of 2020 to take them.

 

[gayl]

"Sandyandshirley" wrote up a comprehensive "tax hump" schedule of SS income combined with other income.

Yes but I didn't understand how to apply it to me. NWBOUND put up a much easier to understand post (see #43 table)

 

[Dtail]

Yes but I didn't understand how to apply it to me. NWBOUND put up a much easier to understand post (see #43 table)

Agree. Had to read my referenced post a bunch of times to try and comprehend it.

 

[gayl]

Agree. Had to read my referenced post a bunch of times to try and comprehend it.

My 'crystal ball' sees a hike up the closest mountain/ hill / coastline in your near future .... it helps. Get out & play .... wasn't that why we FIREd?

 

[Dtail]

My 'crystal ball' sees a hike up the closest mountain/ hill / coastline in your near future .... it helps. Get out & play .... wasn't that why we FIREd?

I know I know. However I do go out and do something physical every day - mostly pickleball and/or long walks.
This site is my relaxing indoors instead of other things......
P.S. No hills or mountains in FLA.

 

[Helena]

I turned 70 1/2 six weeks ago, so this is my first RMD year.

Sure, from a personal perspective, I'd love to eliminate RMDs entirely.

Similarly, I'd love to have a special tax deduction that applies only to bald males who were born in 1947.

But, if I put my public policy hat on, I understand that the gov't has to get taxes somewhere. Allowing me to save pre-tax money and defer taxes on both principal and earnings until 70+ is a huge tax advantage for savers like me. I don't know how to argue that the greater good is served by providing this tax deal.

I certainly don't know how to argue that the greater good is served by allowing my kids to inherit this attractive tax position.

So, I really can't complain about RMDs starting at 70 1/2.

The US government managed a long time before any income tax existed. Lincoln enacted an income tax in 1861 to pay for the civil war. In 1871 congress repealed Lincoln's income tax. The income tax we know began in the 20th century.

Someone made the analogy earlier that government needs the money to fix the potholes in the roads we use. But we all know government continually wastes our tax money on many other questionable things that are not practical, not necessary and sometimes oppressive.

Next time you think the government needs your RMD tax money to function... instead of thinking your money is going to repair potholes, think about your money going to the billions spent on foreign aid in one year.

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[pb4uski]

You seem intent on conveniently ignoring that the deal was that taxes would be DEFERRED on your retirement savings, not that those funds would be tax free. Since you knew (or should have known) that those funds would ultimately be taxed and that if you didn't withdraw them voluntarily that there was something called RMDs that forced withdrawals, why do you find that they are now actually happening so objectionable?

I'm guessing that your current marginal tax rate is lower than it was when you deferred that income... if so, you came out ahead... if not, then you were more successful than you planned because you deferred that income expecting a lower marginal tax rate in retirement... either way... you have won! Be thankful.

The government had wasteful spending both when you deferred that money and now so nothing is different.

 

[Bestwifeever]

Earlier this week there was a presidential statement that no fed employees would receive scheduled raises this year in salary or place of employment compensation because the country can’t afford it. I don’t understand in that case why the country doesn't need the RMD taxes to be collected as planned.

 

[NW-Bound]

I think the gummint is thinking about "delayed gratification", when it will be able to tax more when the geezers finally croak.


PS. When we croak, if our portfolio holds up well, my son who has no intention of marrying will be at least in the 32% tax bracket when the inherited IRA RMD is added on top of his income.

 

[Helena]

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Over time and depending on circumstance, government rules change.

Social Security was not taxed until the 1980s. If the government can implement a tax, it can also eliminate a tax.

RMD draconian rules need to change as many financial experts over the years have advocated... and apparently Trump agrees.

I'm not suggesting no taxes be paid on traditional IRA/401k withdrawals. I'm advocating the elimination of the RMD rule, or at least raising the RMD age at least a decade.

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[NW-Bound]

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Over time and depending on circumstance, government rules change.

Social Security was not taxed until the 1980s. If the government can implement a tax, it can also eliminate a tax.

The gummint needs more and more money. If it eliminates a tax, soon it will have to think of another tax.

And I suspect the new taxes will have to come from people with high incomes, meaning people with high salaries, or retirees with big fat retirement accounts. Can't blame them. I do not want to tax people with little money either. They do not have enough for me to take.

RMD draconian rules need to change as many financial experts over the years have advocated... and apparently Trump agrees.

I'm not suggesting no taxes be paid on traditional IRA/401k withdrawals. I'm advocating the elimination of the RMD rule, or at least raising the RMD age at least a decade.

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For me, I think RMD is a don't care for me, as I will continue to draw money that I do not spend before the age of 70 to minimize taxes.

 

[Helena]

I think the gummint is thinking about "delayed gratification", when it will be able to tax more when the geezers finally croak.


PS. When we croak, if our portfolio holds up well, my son who has no intention of marrying will be in the 32% or higher tax bracket when the inherited IRA RMD is added on top of his income.

If the RMD age were raised or eliminated, I would do what I have already been doing for many years... intelligently withdraw the amount of money I choose from my traditional IRA every year which is a tax advantage to me.

Under RMD rules, the government forces you to withdraw the amount the government chooses [and if you don't calculate and withdraw correctly, the IRS can fine you 50% of the error] which is a tax advantage to the government.

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[Helena]

The gummint needs more and more money.

That's the problem in a nutshell.

The irony of history is... we have come full circle back to being serfs in a neo-feudalistic system.

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[RobbieB]

Serfs? Feudalism?

Really?

 

[braumeister]

It's not feudalism; it's an anarcho-syndicalist commune.

 

[Helena]

Serfs? Feudalism?

Really?

Serfs had to pay a portion of the fruits of their labor [ie, taxes] to their lords.

Here is an interesting example.

How Much Taxes Did a Medieval Peasant Pay? The numbers from Sweden

Does the quote below sound familiar ??

" The historians call this era “a decentralized plunder economy” with extremely high taxes (as well as just outright theft of peasant property) being needed to support huge military expenses. "

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[youbet]

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Others have long advocated the RMD age be raised a decade, to around age 80.

That would be a God-send for many senior taxpayers.

Yes! Those that need the money the least, that is, those who can afford to live a nice retirement without their deferred savings, will now get extra time before beginning to pay the taxes they chose to defer. Perhaps they will do some sort of "means testing" where those with the highest net worth get to wait the longest before beginning to pay the deferred taxes?

Warren and Bill will be thrilled!