New RMD rules for 2020

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tennisplyr
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New RMD rules for 2020

Post by tennisplyr »

For those of you who haven't heard the news (like me), there are new rules for when you have to start taking RMD. Starting in 2020, you must start taking them in the year you turn 72 (not 70 1/2). See below:

www.fool.com/retirement/2020/01/04/new- ... ibuti.aspx
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David Jay
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Re: New RMD rules for 2020

Post by David Jay »

Please note (this is for those who don’t follow the link and have not read other material this subject):

If an individual turned 70.5 in 2019 (or earlier) the old schedule of 70.5 remains. The new age of 72 is only for those who turn 70.5 after January 1, 2020.
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SuzBanyan
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Re: New RMD rules for 2020

Post by SuzBanyan »

David Jay wrote: Sat Feb 01, 2020 9:03 am Please note (this is for those who don’t follow the link and have not read other material this subject):

If an individual turned 70.5 in 2019 (or earlier) the old schedule of 70.5 remains. The new age of 72 is only for those who turn 70.5 after January 1, 2020.
My husband will turn 70.5 this year and, before passage of the SECURE act, we set up his automatic RMDs with Vanguard to start this year. He received a letter from VG this week notifying him of the change in law and that the auto RMDs had been cancelled for now.
Alan S.
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Re: New RMD rules for 2020

Post by Alan S. »

SuzBanyan wrote: Sat Feb 01, 2020 9:09 am
David Jay wrote: Sat Feb 01, 2020 9:03 am Please note (this is for those who don’t follow the link and have not read other material this subject):

If an individual turned 70.5 in 2019 (or earlier) the old schedule of 70.5 remains. The new age of 72 is only for those who turn 70.5 after January 1, 2020.
My husband will turn 70.5 this year and, before passage of the SECURE act, we set up his automatic RMDs with Vanguard to start this year. He received a letter from VG this week notifying him of the change in law and that the auto RMDs had been cancelled for now.
The IRS just released the following notice with respect to these changes, and relief for custodians who have sent out incorrect notices because Congress gave them insufficient time to reprogram their systems.

https://www.irs.gov/pub/irs-drop/n-20-06.pdf

While all custodians must notify account holders of corrections to the incorrect notices by 4/15/2020, the notice is silent regarding WHAT relief will be provided to taxpayers who relied on the incorrect info and actually took distributions from their accounts. This relief should be forthcoming and it's pretty obvious what the nature of that relief will probably be.

There have already been a couple reports of such unneeded distributions going out. One of them was from the TSP.
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OAG
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Re: New RMD rules for 2020

Post by OAG »

Trying to understand why a T-IRA custodian would notify anyone over the age of 72 (personally 79) of the law changes. I am aware the mandatory percentage of calculations was lowered for (most) everyone. However, in my notification they did not even mention the changes in the percentage. Correct me if I am wrong (other than the lowering of the percentages; which they said nothing about, there is absolutely no change for persons over the age of 72. Seems only to add a bit of confusion to the situation.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
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willthrill81
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Re: New RMD rules for 2020

Post by willthrill81 »

My father missed the cutoff point by less than a week (turned 70.5 late in December of 2019). But they are retired and would have made the withdrawals anyway.
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Alan S.
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Re: New RMD rules for 2020

Post by Alan S. »

OAG wrote: Sat Feb 01, 2020 5:10 pm Trying to understand why a T-IRA custodian would notify anyone over the age of 72 (personally 79) of the law changes. I am aware the mandatory percentage of calculations was lowered for (most) everyone. However, in my notification they did not even mention the changes in the percentage. Correct me if I am wrong (other than the lowering of the percentages; which they said nothing about, there is absolutely no change for persons over the age of 72. Seems only to add a bit of confusion to the situation.
First, the RMD % for a given age has not yet been changed, just proposed by the IRS. It is expected that this reduction will be in place starting for 2021 RMDs.

Since 2002, all custodians must send Notices for each RMD year, and that has not changed at all. However, for those reaching 70.5 in 2020, those pre programmed Notices are incorrect since there is no RMD required for those people due to the Secure Act. This recent Notice advises custodians that they must re contact only those people who received incorrect Notices and that group is limited to those who hit 70.5 in 2020. Some of those same people will not have a 2021 RMD either, but the custodians will have their systems re programmed long before the 2021 Notices go out.

Any confusion here is due to Congress allowing no lead time between the signing of legislation and the effective date. This is poor management on Congress' part and the IRS and some custodians are probably irritated about it, but there does not appear to be any regret on the part of Congress. Actually, some elements of legislation are actually retroactive and trigger amended returns.

Changes for owner's RMDs are very simple compared to those for non spouse beneficiaries of those passing after 2019. There is a huge demand for IRS guidance and new Regs on a number of issues which are unclear. Many estate plans are now in limbo including trusts that no longer accomplish what they intended to and will have to be re done.
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OAG
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Re: New RMD rules for 2020

Post by OAG »

Alan S. wrote: Sat Feb 01, 2020 5:35 pm
OAG wrote: Sat Feb 01, 2020 5:10 pm Trying to understand why a T-IRA custodian would notify anyone over the age of 72 (personally 79) of the law changes. I am aware the mandatory percentage of calculations was lowered for (most) everyone. However, in my notification they did not even mention the changes in the percentage. Correct me if I am wrong (other than the lowering of the percentages; which they said nothing about, there is absolutely no change for persons over the age of 72. Seems only to add a bit of confusion to the situation.
First, the RMD % for a given age has not yet been changed, just proposed by the IRS. It is expected that this reduction will be in place starting for 2021 RMDs.

Since 2002, all custodians must send Notices for each RMD year, and that has not changed at all. However, for those reaching 70.5 in 2020, those pre programmed Notices are incorrect since there is no RMD required for those people due to the Secure Act. This recent Notice advises custodians that they must re contact only those people who received incorrect Notices and that group is limited to those who hit 70.5 in 2020. Some of those same people will not have a 2021 RMD either, but the custodians will have their systems re programmed long before the 2021 Notices go out.

Any confusion here is due to Congress allowing no lead time between the signing of legislation and the effective date. This is poor management on Congress' part and the IRS and some custodians are probably irritated about it, but there does not appear to be any regret on the part of Congress. Actually, some elements of legislation are actually retroactive and trigger amended returns.

Changes for owner's RMDs are very simple compared to those for non spouse beneficiaries of those passing after 2019. There is a huge demand for IRS guidance and new Regs on a number of issues which are unclear. Many estate plans are now in limbo including trusts that no longer accomplish what they intended to and will have to be re done.
Thank you for the informative reply. I guess I am getting to the point that changes are confusing, even the ones that have absolutely nothing to do with me.
OAG=Old Army Guy. Retired CW4 USA (US Army) in 1979 21 years of service @ 38.
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Re: New RMD rules for 2020

Post by Traveler »

I just learned of this on a Wall St Journal webinar yesterday. They also said the calculation/formula for RMDs is being redone (sounds like that is a proposal for the IRS according to previous post).
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