Good morning, I wonder if there is another planning angle embedded within the SECURE Act 2.0.
What do you think of this RMD related question?
SECURE 2.0 raises the QLAC limit to $200,000 and interest rate increases in 2022 have made those much more attractive (not that many have noticed however).
I believe SECURE 2.0 allows the amount of income from annuitized qualified assets to be aggregated into the RMD calculation and to count toward the RMD distribution. I know this is not yet ripe for use, as we need Treasury regulations to make it happen.
Do you think that QLACs will count as annuitized assets in this way? If QLAC payments can satisfy part or all of the RMD required for all other qualified assets, we might have a new planning opportunity. There is much concern among retirement income planners on how very large RMDs can become by age 85 and 90 and beyond. Concurrently there is much advice to minimize RMDs in order to minimize taxable income.
Minimizing taxes is a noble objective and it would potentially reduce the impart of IRMAA on Medicare B &D premiums as well as the taxation on Social Security. Much Roth Conversion advice is driving in this direction. Maybe the “New QLAC” would give us another tax planning tool?
The QLAC can reduce RMDs from age 73 or 75 up to age 85, at which point your substantial QLAC income applies to your entire RMD obligation. It might even be marketed by some as “RMD Insurance.” Am I just fantasizing about what SECURE 2.0 can do or is it worth thinking about this more?
Thank you very much–and Happy New Year 2023! Paul McGillivray