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@TheShadow Thank you. I tried the normal tricks......incognito, etc; but I'v not been able read one of their articles for quite some time......and the screen provides the electronic middle finger when attempting to access.
The increase in starting RMD age would apply to all tax-sheltered plans, including 457 plans and regular IRAs (as contrasted with individual retirement annuities). The article lists only 401(k)s, 403(b)s and individual retirement annuities, leaving one to wonder about the rest.
Many (not all) people working more years already have a mechanism to defer RMDs until they retire.
As for everyone else, the ability to put off RMD for more years would benefit primarily those better off, those who don't need the additional tax break.
[T]his is only an issue for about 20% of people because most people already take out the required minimum amount or more annually... That’s “because they need the money to live on” — or they don’t even have a retirement account to begin with.
The Comment section is worthwhile to see the new proposal in different situations. For example,
professor Kelly, "But Munnell objects to increasing the age for RMDs to 75. Employees are permitted to save pretax dollars so they can have a decent retirement, she says. Postponing RMDs to 75 would permit wealthy people to build up big cash piles that they don’t need to touch, she says."
I consider this to be a bit of a tax trap. With the new rules for heir requiring a 10-year withdrawal window, it's quite possible that heirs will be forced to withdraw a lifetime's accumulated savings in just a few years, throwing them into punitive tax brackets, depending upon the number of children heirs involved. For the non-super-rich, Roth conversions in retirement are becoming more and more important.
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KENNETH MORALES Professor Kelly
15 minutes ago You hit on the rational objectively. These new laws would benefit the "under saved" more than the "over saved". The over saved crowd can't take it with them and the Secure Act, "secured" taxes will be paid by their heirs. If Biden gets his way, he would sign legislation that would shut down the step up in basis on those inherited assets, there by increasing thd tax load.
These new laws would benefit the "under saved" more than the "over saved".
The "under saved" essentially by definition aren't maxing out contributions. So they're not the ones who would benefit from increased catch up limits. It's the "over saved" who would "over save" even more. To avoid tax traps, they'll put those extra dollars into Roths. There that extra money will grow tax free for decades until their estate passes to their heirs, who will then have another ten years of tax-free growth.
The "under saved" won't benefit from being able to delay RMDs because they're "under saved" - they already need to draw from their IRAs for economic rather than legal reasons. Without benefiting at all, it's hard to see how the "under saved" will benefit more than the "over saved".
I consider this to be a bit of a tax trap. The "over saved" could between age 72 and 75 take the same withdrawals as they now take under the current RMD regimen. Thus they can easily avoid aggravating the tax trap for heirs. But rather than being forced to keep that money in a taxable account as they are now, the "over saved" would be allowed to redeposit that money into a Roth. (RMDs cannot be converted into Roth dollars.)
But wait, it gets better (for the "over saved") ...
legislation that would shut down the step up in basis With this new ability between ages of 72 and 75 to move those (formerly RMD) dollars out of taxable accounts and into Roths, the "over saved" can now permanently shield appreciation of those dollars from taxation. No more would they have to worry about potential legislation that would do away with a step up. With the dollars in a Roth, who cares?
And better still, by paying taxes on the newly allowed conversions from a taxable account, one would effectively shelter more money and simultaneously reduce one's taxable estate.
Since 2010 when income limits were removed, Roth conversions have been suggested to avoid a tax trap. Advancing the RMD start age to 75 turbocharges this strategy.
Comments
Retirement proposals
Stay Kool, Derf
I tried the normal tricks......incognito, etc; but I'v not been able read one of their articles for quite some time......and the screen provides the electronic middle finger when attempting to access.
Many (not all) people working more years already have a mechanism to defer RMDs until they retire.
As for everyone else, the ability to put off RMD for more years would benefit primarily those better off, those who don't need the additional tax break. Here's What's Wrong With Raising RMD Age to 75, According to Retirement Experts
https://www.thinkadvisor.com/2021/04/16/heres-whats-wrong-with-raising-rmd-age-to-75-according-to-retirement-experts/
The "under saved" essentially by definition aren't maxing out contributions. So they're not the ones who would benefit from increased catch up limits. It's the "over saved" who would "over save" even more. To avoid tax traps, they'll put those extra dollars into Roths. There that extra money will grow tax free for decades until their estate passes to their heirs, who will then have another ten years of tax-free growth.
The "under saved" won't benefit from being able to delay RMDs because they're "under saved" - they already need to draw from their IRAs for economic rather than legal reasons. Without benefiting at all, it's hard to see how the "under saved" will benefit more than the "over saved".
I consider this to be a bit of a tax trap.
The "over saved" could between age 72 and 75 take the same withdrawals as they now take under the current RMD regimen. Thus they can easily avoid aggravating the tax trap for heirs. But rather than being forced to keep that money in a taxable account as they are now, the "over saved" would be allowed to redeposit that money into a Roth. (RMDs cannot be converted into Roth dollars.)
But wait, it gets better (for the "over saved") ...
legislation that would shut down the step up in basis
With this new ability between ages of 72 and 75 to move those (formerly RMD) dollars out of taxable accounts and into Roths, the "over saved" can now permanently shield appreciation of those dollars from taxation. No more would they have to worry about potential legislation that would do away with a step up. With the dollars in a Roth, who cares?
And better still, by paying taxes on the newly allowed conversions from a taxable account, one would effectively shelter more money and simultaneously reduce one's taxable estate.
Since 2010 when income limits were removed, Roth conversions have been suggested to avoid a tax trap. Advancing the RMD start age to 75 turbocharges this strategy.