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Changes to RMD requirements?

 

(@docfiddle)
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Joined: 2 years ago
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It seems likely that Congress will soon pass, the president sign, a bill that among other things raises the minimum age for IRA RMDs from 72 to 75. Although many savers will welcome the extra time to build retirement wealth, some might also have already planned, and desire, to begin those withdrawals at 72 because the later withdrawal dates can increase the tax burden due to the shorter time frame over which they would occur if starting 3 years later. It appears that 72 is baked in to Pralana -- is there a way to set this date, or choose between 72, 73, 74, and 75 so that one can see the tax impact in later years? I realize that I could probably do the calculations outside the tool and find a way to introduce them at earlier ages, but it's not clear how I would do that. Or I could use an earlier, saved, version of the tool before the law took effect to get the numbers for the years before 75 and then jack up expenses or some other account (like the cash account) to force the withdrawals, but that also seems pretty jumbled and might produce unreliable results.

Peter


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(@pizzaman)
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The House version is SECURE Act 2.0. The Senate version is a little different and will need to be reconciled with the House version:

The House’s version was first built on the original SECURE Act's changes to RMD dates. An RMD is a 'Required Minimum Distribution,' which is an annual amount you must withdraw from a traditional IRA beginning at a certain age. The original SECURE Act moved the first RMD date out from age 70.5 to age 72, and the new SECURE Act 2.0 would push that out to age 75 over the next decade as follows:

  • RMDs begin at 73 starting in 2023 for those turning 72 after 12/31/2022 and 73 before 1/1/2030.
  • RMDs begin at 74 starting in 2024 for those turning 73 after 12/31/2029 and 74 before 1/1/2033.
  • RMDs begin at 75 starting in 2033 for those turning 74 after 12/31/2032.4

https://www.cifinancial.com/ci-privatewealth/us/en/insights/secure-act.html

The reason age 72 is "baked" into PRC is because under current law, if you do not take your total RMD starting at age 72, you must pay a 50% excise tax. Under the SECURE Act 2.0, this penalty is reduced to 25%. So it's not tax impact that will be the problem, it's the penalties. Playing around with the ages you start taking your RMDs doesn't really get you anywhere if I understand your question. If the new Act does not pass you HAVE to start taking your RMD at age 72 or pay a BIG penalty. If your concerned about having too much money later in retirement you can always withdraw more then your RMD from your regular IRA. Does that help??

This post was modified 2 weeks ago by Pizza Man

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(@docfiddle)
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Joined: 2 years ago
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@pizzaman Thank you, I had read articles and a draft of the Act, and I understand your reasoning concerning taxes and penalties. After more digging around, I found the answer in the Scheduled Withdrawals Table, where I can set up withdrawals before RMDs kick in, which will go into Cash Account and then into Investment Account, where I want them to go.


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