The feds waived the Required Minimum Distribution from senior's IRA accounts last year. That helped a lot by keeping folks' taxable incomes down reducing a hardship tax burden in a tough year.
I haven't heard anything about them waiving it again this year. Be nice if they would as it's still a tough economy.
Maybe Uncle Joe will take pity on his fellow senior citizens ;-)
There is only one senior citizen Joe cares about.
I'm not sure it is a benefit. I took mine. If the economy is bad, spending money helps it. Paying the tax now or later has no affect on my daily life.
I did not take mine. I did not need it.
Might mention that Crazy Uncle Joe says that more government spending will reduce inflation.
I think the stock market was down so in order for the big boys not to loose too much they suspended the requirement to take out the RMD.
They also raised it to 72 instead of 70 1/2 from then on as the age to start the RMD.
After I turned 65 I decided to start taking some out even though I did not have to. There is a certain ammount I can take out before hitting the next tax bracket so that is the reason. In a few years I would have been hitting that ammount. The market has done very well for me. I had in mind a certain ammount I wanted to keep in the IRA , but the market went up so much I had to up that number.
If you call the fellow senior citizens like the big money boys you bet Uncle Joe is looking afer them, just like all the other politicians.
Who is/are your beneficiary(ies)?
You could be saddling your kids with higher taxes since they'll have to take it out within 10 years of your death. No more lifetime stretches with relatively small RMD's for them. Maybe they won't get it until your spouse dies, but eventually they will.
Depending on their own income, you could end up pushing them into a much higher tax bracket. Your kid makes $100K a year, you leave him/her $1MM, and suddenly they're making $200K. That's how the government will get their taxes. RMD's were supposed empty people's retirement accounts by the time they died. That rarely happened, so they never got their taxes. Now they'll get more because the beneficiaries will be pushed into higher tax brackets.
The new 10 year rule has a lot of people rethinking their strategies regarding their qualified assets. Roth conversions are flying off the proverbial shelf. ;-)
You have a valid point. I'm going to try to save my kids from that problem by spending it now.
Nah, they just called it too early. I'll bet if they knew the market (S&P) was going to recover 67% from the bottom in March, they never would have suspended RMD's. They thought it was going to be another 2009.
Besides, if you have so much of your retirement money tied up in risk assets that you have to sell into a down market just to cover your RMD, you need a better financial advisor - and sometimes that means stop the DIY.
If you knew when you were going to die, you could plan it so that you bounce the check to the undertaker. ;-)
The only time it would is if you had other income and that RMD pushed your combined income past one of those markers. That is the problem with arbitrary income cutoffs. It is not a slope, it is a cliff. A couple hundred extra bucks can cost you thousands, lose your Obamacare or whatever.
Unless you are saying the government will take all of your IRA/401K it is still found money. If the amount left to your kids won't pay the cost of taking it, the government should be ashamed.
If you hadn't mentioned Mr. Biden I would not have replied.
That required an act of Congress last year, right. It wasn't just a decision by trump. Even though the CARES Act passed almost unananimously last March, the spirt of cooperation has seems to have waned, especially by Republicans. Biden can urge, but he can't make them vote for things. (For example, trump threatened any senator who voted for the Infrastructure bill, and even for something Repubicans usually want, only 17 Rep. senators are expected to vote for it. (Was supposed to pass on Friday, but didn't. Saturday planned now if some other monkey wrench is not thrown at it (Monkey wrench... home repair!)
Has anyone introduced such a bill to waive the RMD this year, in either House?
That's not what I'm saying.
I'm just saying that leaving the money in your IRA may not be the best long term tax strategy for you and your beneficiaries. There are strategies that can be used so that less taxes are paid over the long term.
Just as an example, the IRS doesn't say that you have to take your RMD home, just that you have to expose that amount to taxes. So even if you don't need it in a year in which it was suspended, you take it out of your IRA , pay the taxes at your tax rate and reinvest the net amount in a non-IRA account. When you die, your beneficiaries get a step up on those assets and also inherit a smaller IRA, possibly small enough that the 10 year distribution rule doesn't force them into a higher bracket - a bracket that ends up costing them more in taxes than what you would have paid on those same dollars. I'm talking about the total taxes paid by all involved.
Sure there aren't a lot of "suspended" years, but you could take more out of IRA than you need in any year and do the same thing with the excess. Or maybe do Roth conversions. Again, I'm talking about the total taxes paid by all involved.
The statement "it is still found money" is true but if you believe that the government shouldn't be taxing us as much as they do, then that would fly in the face of your feelings. You can't complain about taxes on one hand and then don't do what you can to (legally) reduce them on the other.
"I can do nothing and the kids end up with 60%. Who cares? It's found money. Let the IRS have 40%."
or...
"I can start planning early and the kids may be able to keep 70-80% and, as a family, we all paid less taxes."
If it ever gets to that level, "ashamed " would be too gentle a word.
Why would they?
Because Wade wants it?
Hate to have to structure your life around your taxes.
As for spending it now, I have seen situations requiring extensive nursing home care where there was nothing left for the heirs.
Our sons are well off so there is no real problem.
One should spend a decent ammout of the IRA while in good health. Who knows if you may or may not have to go to a nursing home. At the rate they charge it only takes a few years to deplete what money you may have.
I set aside a number of dollars I want to keep in the IRA. As the stock market has treated me well, I started taking money out of the IRA when I was 63 to spend on things. Still have much more in it than I did when I started taking money out. I try to hit the spot just below where the income from other investments, SS, and pension keeps me from hitting the next tax bracket. As someone mentioned it is not a slope , but a sharp jump. Go over by a few dollars and it may cost you thousands.
There's too much emphasis among many people, even economists, about trying to stay in a lower tax bracket. The way I look at it, the more my taxable income, the more I have left to spend after taxes. I'm happy to see my tax bracket go up. It means I had more income, both before and after taxes. I'm all for using legally allowed tax-advantaged strategies, but when you consider that the higher bracket doesn't apply to your entire taxable income, but only to the increment of income that puts you into the higher bracket, it's usually a lot of effort to save only a small fraction of your entire tax liability.
If you go over by only a few dollars, you only pay the higher rate on those few dollars, not your entire adjusted gross income.
Generally speaking, most wealth managers advise spending down your taxable sources of income from investments and reserving your tax-deferred sources of investment income, such as from IRAs for last. That strategy supposedly results in the smallest cumulative tax bill over the entire duration of the retirement.
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