required minimum distributions
I think that a new law should be passed to eliminate or postpone RMD’s. I am 73 years old, and have been taking RMD’s. However, I don’t need the income right now, and, in light of the huge decline in value of my account, I would prefer not to have to take it. This increases my problem going forward, since my account will be decreased even further with the RMD. If I could defer the RMD, this would decrease my income taxes and perhaps help me keep enough retirement funds for the future. This pertains not only to me; a lot of people my age or older will have to go back to work, and these RMD’s should be postponed for at least 5 years, or eliminated. I would think that Ed Slott could propose this to somebody in Congress.
Permalink Submitted by Al Fry on Wed, 2008-10-08 17:41
This is a grass roots sort of suggestion. It sould be sent to your Senators and Congressperson. Perhaps the AARP would put it on their agenda.
Permalink Submitted by Gregg Lynch on Wed, 2008-10-08 19:13
It really would be a good idea, especially in light of the market conditions. Shoot, if you had everything in certain companies, there might not be enough in the account to COVER the RMD.
Of course, Congress is where good ideas go to die, so don’t hold your breath.
Permalink Submitted by Alan Spross on Wed, 2008-10-08 21:46
There is another side to this situation. The current uniform table reflects improving mortality assumptions, a 50-50 male/female average, and a joint beneficiary 10 years younger than yourself. Therefore it already results in considerable deferral of RMD dollars and preservation of assets for IRA beneficiaries as well as owners.
If a new table offering an RBD of age 75.5 were formulated, starting in the taxpayer’s 80s, where RMDs already increase substantially, there would be even a larger increase. This would result in exposure to higher tax brackets even with today’s marginal rates. If tax rates increase as expected due to the mountain of debt we now face, there would be an even larger exposure to tax loss in taxpayer’s later years. This tax loss would more than offset the benefits of a 5 year delay in RMDs, coming back to haunt the taxpayer who opted for a steeper table.
Of course, if RMDs were totally eliminated, that would be different, but that is not going to happen when the Treasury will be desperate for tax revenue. It would also not be equitable to those who paid taxes early to convert to Roth IRAs partially to eliminate RMDs.
Politically, a “still working” rule might be considered for IRA accounts to put those who did rollovers or saved outside their employer plan on a par with qualified employer plan participants who remain in the workplace. In addition, for them the later increased RMD factors would at least be somewhat offset by the discontinuation of a paycheck.
Permalink Submitted by Al Fry on Thu, 2008-10-09 02:17
Even the Uniform Table is calculated from the Joint Life table, which starts at age 35 or less. So a new table should reflect the longer mortality, resulting in lower divisors.
Permalink Submitted by Clyde Wolf on Thu, 2008-10-09 19:50
Your 2009 RMD will be reduced because of the low balance in your IRA on December 31, 2008.
Based on averages, our IRA is to expire in the same year we do.
Otherwise, somebody else will need to pay the tax when they take their RMD as a beneficiary.
Permalink Submitted by Janine Janine on Thu, 2008-10-09 20:44
Yes, the 2009 RMD will be reduced, but what about the 2008 RMD which is calculated on the [b]12/31/07[/b] balance! In light of the stock market decline, this is unconscionable! Not only retirees but also anyone with an Inherited IRA/Roth is affected. Whoever devised such a horrific schedule!! Of course, neither the Obamas, the McCains, the Clintons, etc., etc., etc. nor the Lehman and AIG executives need to be concerned about their assets!