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Spending Bill Includes Seismic Retirement Changes, Curtails Stretch IRAs

Talent312

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The significant change for us already-retired peep is the delay in RMD's.
IRS will rewrite the factor-tables, making some revise their spreadsheets.
.
 

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Assuming the omnibus bill passes with SECURE act intact, when will the changes take effect? In particular, the delay in RMDs. Will it take effect for tax year 2020, or not until tax year 2021? Anybody know?
 

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"[T]he SECURE Act pushed out the date to start RMDs till age 72, but this only applies to those who did not attain age 70.5 by the end of 2019."

Oh, great. This likely means there will be 2 sets of RMD tables...
One for those already withdrawing, and those not yet withdrawing.
... As are we.
 

x3 skier

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I didn’t study the articles in detail so I’ll let the WSJ explain this to me eventually but it sounds sort of strange. If I have a job after 70.5/72, I can contribute to the IRA that is sending me RMD’s. Be interesting how the numbers work out and if you can essentially grow the IRA over what is sent to you as RMD’s.

Cheers
 

bluehende

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Thanks for posting. Was I wrong in my assumption that my kids could have inherited my 401k and moved it to theirs???? And that now that option is gone?

Also I assume it does not change the options for a spouse?
 

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Thanks for posting. Was I wrong in my assumption that my kids could have inherited my 401k and moved it to theirs???? And that now that option is gone?

Also I assume it does not change the options for a spouse?

Correct, does not affect the options for a spouse. With children, they can no longer withdraw over their lifetime using the current RMD table, and instead they will need to withdraw over a 10 year period. It has never "Move it to theirs" but it has been that they needed to start RMD using their age or to withdraw equal portions for maximum of 5 years. Now that becomes 10 years which will be their only option.
 

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I initiated the conversation with my husband about doing Roth conversion, i.e. pay tax now and then heirs pull out tax free using their age based RMD. With this new bill it makes even more sense to do it than ever. We plan to convert up to the maximum tax rate of 24% for each year.
 

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Assuming the omnibus bill passes with SECURE act intact, when will the changes take effect? In particular, the delay in RMDs. Will it take effect for tax year 2020, or not until tax year 2021? Anybody know?

Congress Passes SECURE Act At Last Minute, Impacting Retirement Planning and Increasing Taxes.

https://www.forbes.com/sites/jamieh...t-planning-and-increasing-taxes/#2c702f8e3a4f.

Richard's 2nd article link (above) may have answered my question above, though I wish article writers were clearer in their explanations. From the above article:
"The most important provision of the SECURE Act – removal of the stretch RMD provisions – is a tax revenue generator, meaning a tax hike on many Americans. This goes into effect Jan. 1, 2020, assuming President Trump signs the bill into law, which seems all but a forgone conclusion."

While this quote really only says that the stretch RMD provisions go into effect 1/1/2020, I'm going to assume it also applies to the age 70.5/72 RMD provision.

Thanks for posting these, Richard.
 

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"[T]he SECURE Act pushed out the date to start RMDs till age 72, but this only applies to those who did not attain age 70.5 by the end of 2019."

Oh, great. This likely means there will be 2 sets of RMD tables...
One for those already withdrawing, and those not yet withdrawing.
... As are we.

I doubt it. The existing tables already cover ages 70 to 104 or so. There's no reason that those same tables can't be used starting at age 72.

Note that, in addition, the IRS is in the middle of drafting new RMD tables. The changes proposed by the IRS will also reduce RMD requirements, because they reflect newer, longer life expectancies.

Also, apparently there's yet another piece of legislation before the Senate (the RESA act) that would push the RMD age back further, to age 75.
 

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Interesting, thanks Richard for the info.
 

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Too soon to say whether they'll be implemented, but here are the RMD tables as they currently exist (RMD and 1/RMD for the percentage withdrawal) compared to a more modern life expectancy table ("new RMD") that reduces the annual minimums:

age RMD 1/RMD new RMD new 1/RMD

72 25.6 3.91% 27.3 3.67%
73 24.7 4.05% 26.4 3.79%
74 23.8 4.20% 25.5 3.93%
75 22.9 4.37% 24.6 4.07%
76 22.0 4.55% 23.7 4.22%
77 21.2 4.72% 22.8 4.39%
78 20.3 4.93% 21.9 4.57%
79 19.5 5.13% 21.0 4.76%
80 18.7 5.35% 20.2 4.95%
81 17.9 5.59% 19.3 5.18%
82 17.1 5.85% 18.4 5.43%
83 16.3 6.13% 17.6 5.68%
84 15.5 6.45% 16.8 5.95%
85 14.8 6.76% 16.0 6.25%
86 14.1 7.09% 15.2 6.58%
87 13.4 7.46% 14.4 6.94%
88 12.7 7.87% 13.6 7.35%
89 12.0 8.33% 12.9 7.75%
90 11.4 8.77% 12.1 8.26%
91 10.8 9.26% 11.4 8.77%
92 10.2 9.80% 10.8 9.26%
93 9.6 10.42% 10.1 9.90%

Entries in red are corrected values
 
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dmbrand

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Looks like there is a grandfather clause.......

From Barrons article on subject:

What happens if I’ve inherited a stretch IRA?
Rest easy. The changes from the bill that close loopholes that allowed stretch IRAs applies to beneficiaries of someone who dies after the end of 2019.

Anyone who inherited an individual retirement account before the end of this year can still draw down the account over a lifetime.
 

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ROYAL HOLIDAY CLUB RHC (POINTS)

MULTIZ321

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Guide To Beating The New Death Tax: The End Of The Stretch IRA.


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Richard
 

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SECURE Act: More Planning Ideas For You To Consider.


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Richard
 

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4 Estate Strategies for Affluent Retirees Under
the SECURE Act.


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