RMD going to 72?

[CardsFan]

For us, "getting more aggressive" means paying 22% or more. I'm not sure this is a compelling reason to cross that threshold. There are some better reasons, like DW filing single after I'm gone. So maybe it just adds a little weight to that decision. Definitely worth pondering further should this become law.

Same for me. I have avoided the 22% bracket. But, like you, the thought of one of us in the higher bracket as a single has been a cause to consider higher conversions. This only adds to that concern.

I will wait and see what, if anything, actually gets passed.

 

[CardsFan]

Sounds as if required withdrawal within 10 years will apply to both traditional and Roth inherited IRAs. Converting to Roth won't stop those withdrawals, but of course will/should eliminate the tax.

Exactly! If I pay tax at 22%, to avoid DS from paying at 32% or higher, he gets more money. Eventually he will need to take the Roth money and re-invest, and pay taxes on future gains.

FWIW, while I am not a fan of this proposal (because it could cost DS some tax money), I can see the logic. IRA's were never intended to provide for a generational transfer of wealth. So I can live with it.

 

[foxfirev5]

Why is it that I don't feel so secure about the future of my tax free Roth withdrawals?

 

[steelyman]

One thing about inherited IRAs (mine, anyway): the money was contributed mainly in the period between the 60s and 80s and was tax-deferred. The Tax Foundation makes available historic brackets (there were a lot back then!).

Withdrawals today at a 22% bracket, even at an accelerated rate, maybe shouldn’t seem so bad. Going forward is a different thing.

 

[CRLLS]

A quick search on the Senate bill does not change the RMD age on IRA's. As for the House Ways and Means bill, References to IRA's does not mention Traditional, Rollover, Inherited or Roth IRA's, simply IRA. There will be changes when consolidating these 2 bills. No need to get excited now. If you feel strongly one way or the other, contact your Congressmen and let them know. I feel this bill will move quickly.

 

[Another Reader]

Is this prospective or will it affect current inherited IRAs?

 

[target2019]

Why is it that I don't feel so secure about the future of my tax free Roth withdrawals?

Probably because you have been around the block and realize a hand shake can be followed by a hard slap.

 

[joeea]

"RMD going to 72?"

Meh. I don't see it's going to make much difference.

But being required to start RMDs "in the April following the year you became age 70 1/2" never made any sense.

 

[CRLLS]

Is this prospective or will it affect current inherited IRAs?

Seeing as how these are 2 different bills and have not been combined and voted on, Everything so far is prospective.

One other thing in both plans is that there would eliminate the maximum age when one can no longer contribute to a tIRA. I'd guess that that part really doesn't affect most of us here.

 

[gwraigty]

Here’s a summary of the House bill https://waysandmeans.house.gov/site...s/documents/SECURE Act section by section.pdf

There isn’t yet a summary of the Senate bill, so here’s the full text https://www.finance.senate.gov/imo/media/doc/OTT19202 (002) As filed.pdf

Here's a summary of the Senate bill:

https://www.finance.senate.gov/imo/media/doc/RESA%20Summary%204.1.19-banner-converted.pdf

 

[gwraigty]

The bills are different and would need to be reconciled, but it makes sense to look over the provisions now and start thinking about options.

Specifics for inherited IRAs for comparison:

House version

Section 401. Modifications to Required Minimum Distribution Rules

The legislation modifies the required minimum distribution rules with respect to defined contribution plan and IRA balances upon the death of the account owner. Under the legislation, distributions to individuals other than the surviving spouse of the employee (or IRA owner), disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or child of the employee (or IRA owner) who has not reached the age of majority are generally required to be distributed by the end of the tenth calendar year following the year of the employee or IRA owner’s death.

Senate version

Section 501. Modifications to Required Minimum Distribution Rules (sec. 401(a)(9) of the Code)

The legislation modifies the required minimum distribution rules with respect to defined contribution plan and IRA account balances upon the death of the account owner. Under the legislation, the account balance is required to be distributed and included in income by the beneficiary by the end of the fifth calendar year following the year of the employee’s or IRA owner’s death. The requirement does not apply to distributions to the surviving spouse of the employee (or IRA owner) or to beneficiaries who are disabled or chronically ill individuals, individuals who are not more than 10 years younger than the employee (or IRA owner), or the child of the employee (or IRA owner) who has not reached the age of majority. An exception to the five-year distribution deadline is provided for each beneficiary to the extent that the balance of the account they receive from the deceased employee or IRA owner does not exceed $400,000, valued as of the date of death. The modification limits the tax benefit for bequests of retirement savings, while protecting the needs of surviving spouses and certain other beneficiaries, and continuing to encourage retirement savings by beneficiaries of such accounts. The legislation also adds new reporting requirements on the account balances held by beneficiaries of deceased employees and IRA owners to ensure compliance.

 

[jebmke]

Presumably this will push out QCDs also. Bummer. Our DAF was configured to run down by 70.5

 

[audreyh1]

Presumably this will push out QCDs also. Bummer. Our DAF was configured to run down by 70.5

So wait and make up for it at 72, or do an additional donation to the DAF bunched in one year?

 

[CardsFan]

I can understand making some changes to eliminate the generational transfer of wealth, but I think the Senate version (5 years) is too short.

 

[jebmke]

So wait and make up for it at 72, or do an additional donation to the DAF bunched in one year?

could wait - that potentially moves close to the limit on QCDs - I'm assuming they will increase the size of RMDs and not extend farther out on the back end since it is an actuarial issue. But I haven't looked at the proposals. for DAF, easier just to donate direct if for only a year.



Personally, I thnk this has a very low chance of going anywhere.

 

[audreyh1]

Personally, I thnk this has a very low chance of going anywhere.

Personally I think it has a very high chance of increasing to 72, because it's a bipartisan proposal and the White House is for it.

 

[jebmke]

Personally I think it has a very high chance of increasing to 72, because it's a bipartisan proposal and the White House is for it.

Well, maybe they will uncap the QCD at the same time.

 

[bingybear]

I think this legislation also has inherited IRA by >10 year younger person will have to clean it out in 10 years.

 

[Big_Hitter]

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

how are they justifying the huge tax loss this would create?

 

[SecondCor521]

how are they justifying the huge tax loss this would create?

Both bills have revenue sections at the end. I infer that those revenue sections are intended to raise the money to offset any tax losses from the main provisions in the bill.

One of the revenue sections is to curtail the ability for beneficiaries to do stretch IRAs.

I've no idea if the bills are predicted to be revenue neutral or not.

 

[ERD50]

Both bills have revenue sections at the end. I infer that those revenue sections are intended to raise the money to offset any tax losses from the main provisions in the bill.

One of the revenue sections is to curtail the ability for beneficiaries to do stretch IRAs.

I've no idea if the bills are predicted to be revenue neutral or not.

So what is the point? Sounds like busy work, just pushing clauses around?

Don't they have real work to do?

-ERD50

 

[GrayHare]

I would think the new 10 year IRA exhaustion rule will bring in quite of bit of tax revenue, sooner than later, and far more than the tax lost from moving the RMD age from 70.5 to 72.

Demographically speaking, people born around 1955 have had the most time to contribute to an IRA (the program began in 1975) and that crowd has now reached the age at which death rates accelerate upward. The value of all inherited IRAs is going to be ramping up soon.

 

[RockLife]

Why?

I have to ask why they are doing this. I know the answer*, but it goes against solving the problem of SS funding running short. Why would they make that problem worse by delaying when they get their taxes?

* Of course, the answer is "to buy votes", everything is political, etc. etc. But at some point, the piper will be paid, of that there is no question.

 

[bingybear]

I have to ask why they are doing this. I know the answer*, but it goes against solving the problem of SS funding running short. Why would they make that problem worse by delaying when they get their taxes?

* Of course, the answer is "to buy votes", everything is political, etc. etc. But at some point, the piper will be paid, of that there is no question.

I'm not sure that moving the RMD to 72 has anything to do with SS. I think the damage done to stretch IRA's will bring in more tax dollars sooner. But again this will likely not have anything to do with SS.

 

[CRLLS]

RMD's taxes do nothing to affect SS solvency IMO. Currently, there is no link between the General Fund and the SS trust fund.

Of course that doesn't negate your "Vote" assertion.