The Securing a Strong Retirement Act of 2020

Section 105, Increase in age for required beginning date for mandatory distributions.

Under current law, participants are generally required to begin taking distributions from their retirement plans at age 72. The policy behind this rule is to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries. The SECURE Act generally increased the required minimum distribution age to 72. The legislation would increase the required minimum distribution age further to 75.

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/2.0Sectionbysection_final.pdf

This proposed legislation makes many changes to pension laws. While it’s not going anywhere soon, if at all, I found this provision rather ironic.

Policymakers, especially the political left tell us:

  • Social Security is woefully inadequate
  • Retirees live in retirement mostly dependent on Social Security
  • Most people have inadequate savings for retirement
  • Everything is unfair in favor of the wealthy

So, shouldn’t we question how future retirees, other than wealthy ones, will be able to delay using retirement funds until age 75?

What game are we playing?

2 comments

  1. Raising RMD to age 75 would benefit me greatly!

    Mandatory RMD causes seniors with modest incomes [like me] to have to pay income tax on their Social Security!

    Like

  2. It is the difference between required and optional, must vs. may.

    Actually, both the SECURE change from 70 1/2 to 72 and this change are very expensive – in terms of lost revenue to the government. Similarly, the newest proposal also includes provisions:
    202 – Increases the maximum Qualified Longevity Annuity purchase from $125,000 to $200,000, and
    307 – A provision that suspends required minimum distributions for those with accounts < $100,000.

    The better, less expensive option (designed to moderate required payouts, and avoid the loss of taxpayer revenue, and the corresponding reductions/pay for's) would be to change RMD back to 70 1/2, re-invigorate the Stretch IRA, and cap the maximum required distribution at no more than 5% of retirement savings (a level reached at about age 78).

    This way, the feds could have their cake (revenue) and eat it too (folks need not "run out of money" before they run out of time) – relatively close to the 4% Rule – now something else?????

    See: https://www.forbes.com/advisor/investing/is-4-four-percent-rule-still-valid/
    And: https://www.fa-mag.com/news/choosing-the-highest–safe–withdrawal-rate-at-retirement-57731.html?section=308

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s