Author Topic: RMD Age Going Up? (No, but maybe required distributions going down a bit)  (Read 1903 times)

Scortius

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Looks like there are a few small 401k changes in the pipeline. Both look like they'll have a positive, albeit minor effect.

https://www.marketwatch.com/story/trump-to-issue-executive-order-on-potential-retirement-savings-changes-2018-08-30
« Last Edit: August 31, 2018, 05:10:25 PM by Scortius »

Roothy

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Re: RMD Age Going Up?
« Reply #1 on: August 31, 2018, 03:23:23 PM »
Deets are behind a paywall.  What are they?

PDXTabs

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Re: RMD Age Going Up?
« Reply #2 on: August 31, 2018, 04:02:54 PM »

secondcor521

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Re: RMD Age Going Up?
« Reply #3 on: August 31, 2018, 05:03:21 PM »
Deets are behind a paywall.  What are they?

Wasn't paywalled for me... :shrug:

Basically Trump is going to sign an executive order asking the Treasury to see about changing the RMD factors because people are living slightly longer.  With the RMD factors changed, people would see lower RMD's and defer more for longer.

Despite the thread title, I didn't see anything about raising the RMD age from 70.5 in the article.

I ignored the part about 401k's since I don't have one of those currently.

lhamo

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Re: RMD Age Going Up?
« Reply #4 on: August 31, 2018, 05:06:42 PM »
The proposal is to change the average life expectancy numbers to more accurately reflect current averages.  RMD start date of 70.5 is not affected.

Scortius

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Re: RMD Age Going Up?
« Reply #5 on: August 31, 2018, 05:09:20 PM »
Thanks for the correction on the title inaccuracy. I guess this means that RMDs will start at the same time, but the required amount will be lower?

secondcor521

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That's the way I read it.

Erica

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #7 on: September 01, 2018, 12:15:04 PM »
From Wiki

The purpose of the RMD rules is to ensure that people do not accumulate retirement accounts, defer taxation, and leave these retirement funds as an inheritance. Instead, required minimum distributions force the holder to withdraw at least some of the funds as taxable distributions while still alive.


This is my goal. To leave at least 50% of my small retirement account to our son along with our home.

Yet there are alot of cons to this
 
1. IRS will take in much less money due to less taxation.
2. Less funding for the very poor as less funds are accumulated.
3. Less money going into the economy.Generations of people making passive income while not actually hold a job being productive, contributing members of society. Making the rich, even richer.




zolotiyeruki

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #8 on: September 02, 2018, 08:11:24 AM »
The purpose of the RMD rules is to ensure that people do not accumulate retirement accounts, defer taxation, and leave these retirement funds as an inheritance. Instead, required minimum distributions force the holder to withdraw at least some of the funds as taxable distributions while still alive.
...
Yet there are alot of cons to this
 
1. IRS will take in much less money due to less taxation.
2. Less funding for the very poor as less funds are accumulated.
3. Less money going into the economy.Generations of people making passive income while not actually hold a job being productive, contributing members of society. Making the rich, even richer.
My understanding is that whether someone withdraws their own IRA/401k or leaves it as an inheritance, it gets taxed either way, thus invalidating points 1 and 2 above.  If the account owner chooses not to withdraw the funds earlier, it means the taxes are deferred, not avoided entirely.  And when they eventually *are* withdrawn, taxes are assessed on the (presumably now larger) amount.  Is that not the case?

And what's preventing someone from taking their RMDs and simply turning around and sticking that money back in a taxable account to be inherited later, thus making point #3 moot (i.e. RMDs don't prevent that from happening).

It seems to me that the only effect RMDs have is to force the taxes on that money to be paid earlier.  Am I missing something?
« Last Edit: September 02, 2018, 08:16:24 AM by zolotiyeruki »

Erica

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #9 on: September 03, 2018, 02:24:53 PM »
The purpose of the RMD rules is to ensure that people do not accumulate retirement accounts, defer taxation, and leave these retirement funds as an inheritance. Instead, required minimum distributions force the holder to withdraw at least some of the funds as taxable distributions while still alive.
...
Yet there are alot of cons to this
 
1. IRS will take in much less money due to less taxation.
2. Less funding for the very poor as less funds are accumulated.
3. Less money going into the economy.Generations of people making passive income while not actually hold a job being productive, contributing members of society. Making the rich, even richer.

Quote
  My understanding is that whether someone withdraws their own IRA/401k or leaves it as an inheritance, it gets taxed either way, thus invalidating points 1 and 2 above.  If the account owner chooses not to withdraw the funds earlier, it means the taxes are deferred, not avoided entirely.  And when they eventually *are* withdrawn, taxes are assessed on the (presumably now larger) amount.  Is that not the case?

And what's preventing someone from taking their RMDs and simply turning around and sticking that money back in a taxable account to be inherited later, thus making point #3 moot (i.e. RMDs don't prevent that from happening).

It seems to me that the only effect RMDs have is to force the taxes on that money to be paid earlier.  Am I missing something?

1. A ROTH IRA isn't necessarily taxable.
You can defer taxation forever depending upon your countable income.
We are low income so plan to slowly covert it over via many yrs.
The inheritor, our son, is NOT low income so would endure a huge tax burden otherwise.
The State of Calif , where we reside,is one of the few States which tax ROTH IRA withdraws, every single time.
2. ROTH IRA is only federally taxable, to the inheritor, if it was created within 5 years.
In most states, if the Roth IRA was created  5+ yrs,  the inheritor will pay zero tax.
3.  It sounds as if you've invalidated many of my points anyhow.

Considering this more,...very few people probably got such a late start saving.
We were very late bloomers.
Many health issues were cleared up when the ACA took effect so we both work alot more.
I was able to get a better job, not great job, but better paying w/benefits
despite being born with severe eye disabilities.
Hence why working p/t as long as possible is my future.
Ideally until mid 70's
My extremely conservative estimate of the ROTH IRA at my age of 70.5 is between 40-100K (beg. at 3%+) for the S&p 500.
We'll have t2 retirement accounts to roll over.
The second acct will allow a modest withdraw each yr starting at 70.5 yrs. along with our Social Security.

« Last Edit: September 03, 2018, 02:34:29 PM by Erica »

Gin1984

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #10 on: September 03, 2018, 02:46:25 PM »
The purpose of the RMD rules is to ensure that people do not accumulate retirement accounts, defer taxation, and leave these retirement funds as an inheritance. Instead, required minimum distributions force the holder to withdraw at least some of the funds as taxable distributions while still alive.
...
Yet there are alot of cons to this
 
1. IRS will take in much less money due to less taxation.
2. Less funding for the very poor as less funds are accumulated.
3. Less money going into the economy.Generations of people making passive income while not actually hold a job being productive, contributing members of society. Making the rich, even richer.

Quote
  My understanding is that whether someone withdraws their own IRA/401k or leaves it as an inheritance, it gets taxed either way, thus invalidating points 1 and 2 above.  If the account owner chooses not to withdraw the funds earlier, it means the taxes are deferred, not avoided entirely.  And when they eventually *are* withdrawn, taxes are assessed on the (presumably now larger) amount.  Is that not the case?

And what's preventing someone from taking their RMDs and simply turning around and sticking that money back in a taxable account to be inherited later, thus making point #3 moot (i.e. RMDs don't prevent that from happening).

It seems to me that the only effect RMDs have is to force the taxes on that money to be paid earlier.  Am I missing something?

1. A ROTH IRA isn't necessarily taxable.
You can defer taxation forever depending upon your countable income.
We are low income so plan to slowly covert it over via many yrs.
The inheritor, our son, is NOT low income so would endure a huge tax burden otherwise.
The State of Calif , where we reside,is one of the few States which tax ROTH IRA withdraws, every single time.
2. ROTH IRA is only federally taxable, to the inheritor, if it was created within 5 years.
In most states, if the Roth IRA was created  5+ yrs,  the inheritor will pay zero tax.
3.  It sounds as if you've invalidated many of my points anyhow.

Considering this more,...very few people probably got such a late start saving.
We were very late bloomers.
Many health issues were cleared up when the ACA took effect so we both work alot more.
I was able to get a better job, not great job, but better paying w/benefits
despite being born with severe eye disabilities.
Hence why working p/t as long as possible is my future.
Ideally until mid 70's
My extremely conservative estimate of the ROTH IRA at my age of 70.5 is between 40-100K (beg. at 3%+) for the S&p 500.
We'll have t2 retirement accounts to roll over.
The second acct will allow a modest withdraw each yr starting at 70.5 yrs. along with our Social Security.


California does not tax Roth IRA withdrawals.  What are you talking about?

zolotiyeruki

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #11 on: September 03, 2018, 03:33:03 PM »
Since Roth contributions are made with already-taxed money, and not taxed later, why should the IRS care whether you spend it, or your inheritors?

seattlecyclone

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Re: RMD Age Going Up? (No, but maybe required distributions going down a bit)
« Reply #12 on: September 03, 2018, 10:31:21 PM »
Since Roth contributions are made with already-taxed money, and not taxed later, why should the IRS care whether you spend it, or your inheritors?

Simple. The sooner the money gets out of the Roth IRA tax shelter, the sooner that any future earnings on that money can be taxed again. If you have money that you don't plan to spend yet sitting in a Roth IRA, the IRS gets no tax out of it. If they force you to take an RMD, you'll invest it in a taxable account where you'll be paying taxes on dividends and capital gains from then on.