Changes to 401(k) and IRAs, SECURE Act - It's signed

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LadyGeek
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Re: [Proposed changes to 401(k) and IRAs, SECURE Act]

Post by LadyGeek »

I merged aerosurfer's thread into the on-going discussion.
aerosurfer wrote: Thu Dec 19, 2019 6:03 pm Apologies if I need to wait for presidential signature in this...
We'll wait until the bill is signed into law.

Here's the latest status: H.R.1994 - Setting Every Community Up for Retirement Enhancement Act of 2019 (Senate - 06/03/2019 Received in the Senate.)

Update: See below.
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Re: [Proposed changes to 401(k) and IRAs, SECURE Act]

Post by LadyGeek »

Thanks to a member who PM'd me to correct my previous post.

The SECURE Act is now part of H.R.1865 - Further Consolidated Appropriations Act, 2020 (government spending bill)

"Setting Every Community Up for Retirement Enhancement Act of 2019" is one of the "short titles" in the bill.

When the president signs the bill into law, we'll unlock the thread.
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Age for first RMD

Post by Clamshell »

[Merged into the ongoing discussion. The bill has not at this point been signed into law, so the thread remains locked. -- mod oldcomputerguy]

Do I read correctly that the new "Retirement" bill just passed by Congress delays to age 72 the tax year for which RMDs need to start? WSJ article this morning.
Great news.
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Re: Age for first RMD

Post by retired@50 »

Clamshell wrote: Fri Dec 20, 2019 1:15 pm Do I read correctly that the new "Retirement" bill just passed by Congress delays to age 72 the tax year for which RMDs need to start? WSJ article this morning.
Great news.
It will be great news as soon as the President actually signs it...

Regards,
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Re: Age for first RMD

Post by JoeRetire »

Clamshell wrote: Fri Dec 20, 2019 1:15 pm Do I read correctly that the new "Retirement" bill just passed by Congress delays to age 72 the tax year for which RMDs need to start?
Yup.
When/if the president signs it into law, then we can discuss the good and the bad of the new laws.
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Re: Age for first RMD

Post by Wiggums »

JoeRetire wrote: Fri Dec 20, 2019 1:34 pm
Clamshell wrote: Fri Dec 20, 2019 1:15 pm Do I read correctly that the new "Retirement" bill just passed by Congress delays to age 72 the tax year for which RMDs need to start?
Yup.
When/if the president signs it into law, then we can discuss the good and the bad of the new laws.
+1
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Re: Age for first RMD

Post by RickBoglehead »

The changes that may be coming show why people shouldn't plan for absolutes. Things change. I have 90% of our retirement funds in Roth for that very reason.
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Re: Age for first RMD

Post by dual »

Clamshell wrote: Fri Dec 20, 2019 1:15 pm Great news.
Agreed. With longer expected lifetimes, this change is long overdue. It will certainly affect my calculations as 2 years of tax-deferred compounding can pay for a lot of federal taxes particularly if I move to a lower tax state.
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Re: [Proposed changes to 401(k) and IRAs, SECURE Act]

Post by Mel Lindauer »

President Trump has signed the bill so it's now the law of the land. This thread is unlocked. Have at it!
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Re: Are existing stretch IRAs safe?

Post by whodidntante »

Patrick584 wrote: Fri Jun 14, 2019 8:33 pm Details on the Secure act are a little scarce. It looks like the elimination of the stretch IRA will only apply to future dead people and existing stretch IRAs can continue indefinitely. Is this correct.
If so, that would significantly reduce the tax benefits of dying. :twisted:
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Re: Are existing stretch IRAs safe?

Post by FIREchief »

whodidntante wrote: Sat Dec 21, 2019 12:22 am
Patrick584 wrote: Fri Jun 14, 2019 8:33 pm Details on the Secure act are a little scarce. It looks like the elimination of the stretch IRA will only apply to future dead people and existing stretch IRAs can continue indefinitely. Is this correct.
If so, that would significantly reduce the tax benefits of dying. :twisted:
It will actually increase the relative benefits of dying prior to 1/1/20. :twisted:
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by fyre4ce »

While this doesn’t impact those who already have inherited IRAs, it’s a big impact to those who have big IRA’s (especially traditional) and are planning on leaving them to heirs. The 10 year period blunts things somewhat, but inheriting a $2m traditional IRA will still result in $200k of taxable income each year (roughly).

It would have been nice if this were somehow scheduled for a future change, to give people time to react.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by beehivehave »

Some good, some bad. Mostly bad, gives people more temptations disguised as "choices"and mostly makes financial planning more complicated.
That 10 year rule is horrendous and by itself negates all the positives.
[OT comment removed by moderator oldcomputerguy]
Last edited by beehivehave on Sat Dec 21, 2019 1:13 am, edited 1 time in total.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Gleevec »

I don’t understand the mechanics of non spouse Roth IRA disbursement. So in year 10 after my death, my children have to have taken all of the Roth IRA income, which is tax free, into their taxable account it seems now.

Do the shares in the Roth IRA have to be liquidated or is it just a transfer of underlying assets into their taxable account by year 10?

If it’s an underlying asset transfer, is there any step up basis?
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by fyre4ce »

beehivehave wrote: Sat Dec 21, 2019 1:08 am Some good, some bad. Mostly bad, gives people more temptations disguised as "choices"and mostly makes financial planning more complicated.
That 10 year rule is horrendous and by itself negates all the positives.
[OT comment removed by moderator oldcomputerguy]
What aspects do you think are a boon to the financial services industry?
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by 02nz »

Gleevec wrote: Sat Dec 21, 2019 1:12 am I don’t understand the mechanics of non spouse Roth IRA disbursement. So in year 10 after my death, my children have to have taken all of the Roth IRA income, which is tax free, into their taxable account it seems now.

Do the shares in the Roth IRA have to be liquidated or is it just a transfer of underlying assets into their taxable account by year 10?

If it’s an underlying asset transfer, is there any step up basis?
Disbursement means liquidation. Nothing preventing you from buying the exact same equities in the taxable account as what was previous held in the Roth IRA, of course, you just lose the tax sheltering. And why would there be a step-up in basis? A Roth IRA doesn't have basis.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by beehivehave »

fyre4ce wrote: Sat Dec 21, 2019 1:13 am
beehivehave wrote: Sat Dec 21, 2019 1:08 am Some good, some bad. Mostly bad, gives people more temptations disguised as "choices"and mostly makes financial planning more complicated.
That 10 year rule is horrendous and by itself negates all the positives.
[OT comment removed by moderator oldcomputerguy]
What aspects do you think are a boon to the financial services industry?
- Allow IRA contributions after 70 1/2
- Allows for annuities to be sold in 401(k) plans
- Multi-employer 401(k) plans are easier
- Raising age for RMD
Not all of these are bad for individuals but they all serve to increase contributions, keep money under management longer and present new opportunities for commissions.
The new 10 year rule is bad for everybody except the tax man, but the inherited money will find its way back.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by FIREchief »

fyre4ce wrote: Sat Dec 21, 2019 12:57 am While this doesn’t impact those who already have inherited IRAs, it’s a big impact to those who have big IRA’s (especially traditional) and are planning on leaving them to heirs. The 10 year period blunts things somewhat, but inheriting a $2m traditional IRA will still result in $200k of taxable income each year (roughly).

It would have been nice if this were somehow scheduled for a future change, to give people time to react.
Roth conversion.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by RubyTuesday »

FIREchief wrote: Sat Dec 21, 2019 1:33 am
fyre4ce wrote: Sat Dec 21, 2019 12:57 am While this doesn’t impact those who already have inherited IRAs, it’s a big impact to those who have big IRA’s (especially traditional) and are planning on leaving them to heirs. The 10 year period blunts things somewhat, but inheriting a $2m traditional IRA will still result in $200k of taxable income each year (roughly).

It would have been nice if this were somehow scheduled for a future change, to give people time to react.
Roth conversion.
If you’re not the spouse of the person you inherited the IRA from you can’t Roth convert.

Though you probably weren’t suggesting that but rather “don’t end up dying with large traditional IRA going to non-spouse. Roth conversion.”
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by willthrill81 »

By my estimation, the 10 year disbursement rule makes Roth conversions even more desirable than before for the sake of one's heirs. It also increases the attractiveness of taxable accounts since heirs still get a step-up in cost basis and can hang on to the assets for as long as they want.

This may also make early retirement a little bit more attractive since it would increase the available time to do Roth conversions for the benefit of heirs, although having to claim SS benefits by age 70 negates some of the benefit of RMD age increasing to age 72 for Roth conversion purposes.

I suspect that we'll see more discussion about heirs' likely tax rates and general situation.
RubyTuesday wrote: Sat Dec 21, 2019 1:39 am
FIREchief wrote: Sat Dec 21, 2019 1:33 am
fyre4ce wrote: Sat Dec 21, 2019 12:57 am While this doesn’t impact those who already have inherited IRAs, it’s a big impact to those who have big IRA’s (especially traditional) and are planning on leaving them to heirs. The 10 year period blunts things somewhat, but inheriting a $2m traditional IRA will still result in $200k of taxable income each year (roughly).

It would have been nice if this were somehow scheduled for a future change, to give people time to react.
Roth conversion.
If you’re not the spouse of the person you inherited the IRA from you can’t Roth convert.

Though you probably weren’t suggesting that but rather “don’t end up dying with large traditional IRA going to non-spouse. Roth conversion.”
And it's important to keep in mind that the time to do Roth conversions is when both spouses are alive. Roth conversions are a lot less attractive for widow(er)s filing single.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by RubyTuesday »

02nz wrote: Sat Dec 21, 2019 1:24 am
Gleevec wrote: Sat Dec 21, 2019 1:12 am I don’t understand the mechanics of non spouse Roth IRA disbursement. So in year 10 after my death, my children have to have taken all of the Roth IRA income, which is tax free, into their taxable account it seems now.

Do the shares in the Roth IRA have to be liquidated or is it just a transfer of underlying assets into their taxable account by year 10?

If it’s an underlying asset transfer, is there any step up basis?
Disbursement means liquidation. Nothing preventing you from buying the exact same equities in the taxable account as what was previous held in the Roth IRA, of course, you just lose the tax sheltering. And why would there be a step-up in basis? A Roth IRA doesn't have basis.
Your distribution (under the right context, e.g. over 59 1/2, Roth open 5 years, etc) is not taxable. So if you buy the same asset you have full basis at the cost of the purchase. So as most people think of it, you have stepped up the basis. The gains in the Roth were tax sheltered, you didn’t realize any income or capital gains, you made a tax free distribution. And If I understand correctly, you’re basically just losing tax sheltering of future capital gains and income distributions.

Is that others’ understanding?
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by FIREchief »

RubyTuesday wrote: Sat Dec 21, 2019 1:39 am
FIREchief wrote: Sat Dec 21, 2019 1:33 am
fyre4ce wrote: Sat Dec 21, 2019 12:57 am While this doesn’t impact those who already have inherited IRAs, it’s a big impact to those who have big IRA’s (especially traditional) and are planning on leaving them to heirs. The 10 year period blunts things somewhat, but inheriting a $2m traditional IRA will still result in $200k of taxable income each year (roughly).

It would have been nice if this were somehow scheduled for a future change, to give people time to react.
Roth conversion.
If you’re not the spouse of the person you inherited the IRA from you can’t Roth convert.

Though you probably weren’t suggesting that but rather “don’t end up dying with large traditional IRA going to non-spouse. Roth conversion.”
Exactly.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by celia »

02nz wrote: Sat Dec 21, 2019 1:24 am
Gleevec wrote: Sat Dec 21, 2019 1:12 am I don’t understand the mechanics of non spouse Roth IRA disbursement. So in year 10 after my death, my children have to have taken all of the Roth IRA income, which is tax free, into their taxable account it seems now.

Do the shares in the Roth IRA have to be liquidated or is it just a transfer of underlying assets into their taxable account by year 10?

If it’s an underlying asset transfer, is there any step up basis?
Disbursement means liquidation. Nothing preventing you from buying the exact same equities in the taxable account as what was previous held in the Roth IRA, of course, you just lose the tax sheltering. And why would there be a step-up in basis? A Roth IRA doesn't have basis.
"Disbursement" DOES NOT mean liquidation. It means "paying it out". "Liquidation" means changing assets to cash. Either one can occur without the other. Or they can occur together in the same transaction. For example, if your account (IRA or not) contains 100 shares of Fund X, a disbursement means 100 shares are removed from the account and put in another account. If you "liquidate" 100 shares of Fund X, that means you are selling them and receiving cash (or money market fund shares).

These terms are not only commonly used for IRAs but also when distributing assets of an estate. To "disburse" the assets in an estate, the title of the asset is changed to a new owner (beneficiary) or in the case of jewelry (or items that don't usually have ownership titles), the asset is handed over to the new owner. To "disburse" the assets in an IRA, the shares are moved to a taxable account. Either of these transactions can be done while "liquidating" the asset, but that is not necessary.

At Vanguard, you need to mail in a form to disburse assets in-kind to a taxable account. The asset doesn't get a "cost basis" until it enters a taxable account.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Alchemist »

letsgobobby wrote: Sat Dec 21, 2019 4:17 am This is a true betrayal of a generation of investors.
To be fair, the investor is unaffected. A non-Spousal heir will face a higher tax bill sooner.

This is really just a new form of estate tax which does not affect living investors.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by TedSwippet »

letsgobobby wrote: Sat Dec 21, 2019 4:17 amThis is a true betrayal of a generation of investors.
It's an extension of what congress has been doing recently to US expats, with things like the 'deemed disposition' of IRAs in the 'exit tax' of 2008's HEART act, the section 2801 tax on recipients of bequests from 'covered expatriates' from the same act, and the 'deemed disposition' of retained company profits in GILTI, part of last year's TCJA.

Welcome to the party. :-(
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Rainmaker41 »

The RMD age is raised to 72.

How does this impact someone who had their first RMD already, but will not turn 72 until a later year? Is the rule “if age 72 or greater on Dec 31 of tax year, then an RMD is required in that tax year”?
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by wabbott »

fyre4ce wrote: Sat Dec 21, 2019 1:13 am
beehivehave wrote: Sat Dec 21, 2019 1:08 am Some good, some bad. Mostly bad, gives people more temptations disguised as "choices"and mostly makes financial planning more complicated.
That 10 year rule is horrendous and by itself negates all the positives.
[OT comment removed by moderator oldcomputerguy]
What aspects do you think are a boon to the financial services industry?
Revisions to the safe harbor provisions relative to annuities. If I understand correctly, auditing standards will be relaxed, so that annuities that might otherwise be prohibited in retirement accounts will now be allowed.

IMO, that was the reason the insurance/financial services industry pushed this bill so vigorously. Watch for lots of advertising telling oldsters that they should "retire their risk," and let "us" (insurance/fin svcs) handle your money and "guarantee" an income stream for life.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Vanguard Fan 1367 »

I think that it rocks that we don't have to do RMD's until 72. Nice to have a couple of years of lower income to do things like Roth Conversions.
Last edited by Vanguard Fan 1367 on Sat Dec 21, 2019 6:08 am, edited 1 time in total.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Seasonal »

Rainmaker41 wrote: Sat Dec 21, 2019 5:38 am The RMD age is raised to 72.

How does this impact someone who had their first RMD already, but will not turn 72 until a later year? Is the rule “if age 72 or greater on Dec 31 of tax year, then an RMD is required in that tax year”?
If you're already 70-1/2, this does not impact you. It only affects those who are not 70-1/2 by the end of 2019.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Seasonal »

Vanguard Fan 1367 wrote: Sat Dec 21, 2019 6:01 am I think that it rocks that we don't have to do RMD's until 72 and a half. Nice to have a couple of years of lower income to do things like Roth Conversions.
I believe it's 72, not 72-1/2.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by RickBoglehead »

90% of our retirement assets are Roth. Yea us!
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Seasonal »

Is my understanding correct that the new law does not change the RMD table, but that the IRS has published proposed regulations that would reduce the RMD amounts by a bit?

https://www.federalregister.gov/documen ... ng-minimum and search for "table 2 to paragraph (c)"
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by wabbott »

Seasonal wrote: Sat Dec 21, 2019 6:18 am Is my understanding correct that the new law does not change the RMD table, but that the IRS has published proposed regulations that would reduce the RMD amounts by a bit?

https://www.federalregister.gov/documen ... ng-minimum and search for "table 2 to paragraph (c)"
Kiplinger says that if things "stay on track" the new RMD tables will be available for 2021 distributions.
https://www.kiplinger.com/article/retir ... tions.html
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Stormbringer »

Can the 10-year stretch limit be somewhat "thwarted" by buying an annuity inside the account in year 10, thus spreading the tax bill over the remainder of the beneficiaries life?
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Silk McCue »

Stormbringer wrote: Sat Dec 21, 2019 7:08 am Can the 10-year stretch limit be somewhat "thwarted" by buying an annuity inside the account in year 10, thus spreading the tax bill over the remainder of the beneficiaries life?
I would have to say no in the same way that you couldn't buy an annuity in the amount of your RMD today to avoid taking it out of the IRA in the year required and stretch it out into the future.

Cheers
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by hoffse »

The limitations on the stretch IRA have an enormous impact on heirs.

My parents and I have been tracking this since the spring. My parents have a couple of very large traditional IRAs, and they just retired in the last year. I am very lucky (and grateful!) that they are going to aggressively convert almost all of it to Roth over the next few years while the lower rates of the TCJA are in effect and while they are both alive and can convert under the higher married threshold. They will hold back a limited amount for charitable giving and long term care, but the rest of it is getting converted.

Why? Because I have been in a higher tax bracket than they are for the last several years, and it appears that this will continue indefinitely while my husband and I are in our working years (we are 32 and 33 so we have a long way to go). And in the event they live long enough for me to also be retired by the time they pass, a large traditional IRA would totally screw up my own tax planning in retirement.

I’m grateful that they are willing to take that tax hit for my family. And my husband and I intend to do the same for my 2 year old son’s future family, pending any additional changes to these rules in the future.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Retired2013 »

The RMD change 70.5 to 72, will extend the RMD requirement by 1 or 2 years depending on when you were born. If You were born in January – June, you benefit by 2 years. If you were born July – December, you benefit by 1 year.

The way I’m looking at the elimination of the stretch is this:

A Roth account will not have an RMD now but needs to be disbursed within 10 years. So, my beneficiaries should hold the Roth account for 10 years to benefit from tax free earnings for 10 years.

The hard one is the tax deferred accounts. Now I need to look at the tax rates for each beneficiary. Hopefully I will pass in my 80’s or 90’s so my beneficiaries (children, nieces, nephews) will be in their 60’s or 70’s. They may be retired or near retirement so they may be able to adjust other income. This might even help them to retire early if they now have a 10-year income stream. If they are currently doing Roth conversions, maybe they stop the Roth conversions. Of course, that just extends their problem of too much in tax deferred.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by stan1 »

Folks, just remember that while you are now trying to optimize for something that will happen in 20 or 50 years the laws could change again!

Diversification, and your kids and grandkids will thank you for paying your own taxes instead of passing your tax bills unpaid on to them if you do Roth Conversions. Also, makes taxable investing accounts more favorable too (so long as qualified dividends, long term capital gains, and stepped up cost basis remain).
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by LadyGeek »

Several off-topic posts have been removed. This is a "no politics" forum. As a reminder, see: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:

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Also, general rants are off-topic. Please state your concerns in a civil, factual manner.

In order to provide focused advice, questions on how the law applies to your own situation should be asked in a separate thread.
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Chuck5781 »

stan1 wrote: Sat Dec 21, 2019 7:57 am
your kids and grandkids will thank you for paying your own taxes instead of passing your tax bills unpaid on to then
I would gladly accept anyone’s IRA and cheerfully pay the taxes, seeing how the funds to pay the taxes are in the IRA.
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aerosurfer
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by aerosurfer »

Are New RMD life expectancy charts available? Does RMD @ 72 change the formula for withdrawals? How will it change for those Taking them now?
Silk McCue
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Silk McCue »

Chuck5781 wrote: Sat Dec 21, 2019 9:14 am
stan1 wrote: Sat Dec 21, 2019 7:57 am
your kids and grandkids will thank you for paying your own taxes instead of passing your tax bills unpaid on to then
I would gladly accept anyone’s IRA and cheerfully pay the taxes, seeing how the funds to pay the taxes are in the IRA.
Of course you would. But, if you wanted to leave an inheritance to your children and grandchildren you would pay attention to the tax implications of how this law would affect them and consider what might be done to mitigate the impact.

Cheers
Silk McCue
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Silk McCue »

aerosurfer wrote: Sat Dec 21, 2019 9:20 am Are New RMD life expectancy charts available? Does RMD @ 72 change the formula for withdrawals? How will it change for those Taking them now?
Wabbot provided a link to the proposed RMD tables a few posts up. A few posts up it was also discussed the if you have already turned 70.5 by 12/31/2019 then this change does not affect you and you must continue on with RMDs.

It’s always good to peruse the thread to see what has already been addressed.

Cheers
prd1982
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by prd1982 »

Re elimination of the stretch IRA --

I believe there are special rules for IRAs left to minor children & people with disabilities. I think the IRA has work to do to define the disability criteria.
Rainmaker41
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Rainmaker41 »

Seasonal wrote: Sat Dec 21, 2019 6:02 am
Rainmaker41 wrote: Sat Dec 21, 2019 5:38 am The RMD age is raised to 72.

How does this impact someone who had their first RMD already, but will not turn 72 until a later year? Is the rule “if age 72 or greater on Dec 31 of tax year, then an RMD is required in that tax year”?
If you're already 70-1/2, this does not impact you. It only affects those who are not 70-1/2 by the end of 2019.
Does anyone have a source confirming persons already 70 1/2 have to take the RMD in the year they are 71 but not yet 72?
mrc
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by mrc »

Rainmaker41 wrote: Sat Dec 21, 2019 10:59 am
Seasonal wrote: Sat Dec 21, 2019 6:02 am
Rainmaker41 wrote: Sat Dec 21, 2019 5:38 am The RMD age is raised to 72.

How does this impact someone who had their first RMD already, but will not turn 72 until a later year? Is the rule “if age 72 or greater on Dec 31 of tax year, then an RMD is required in that tax year”?
If you're already 70-1/2, this does not impact you. It only affects those who are not 70-1/2 by the end of 2019.
Does anyone have a source confirming persons already 70 1/2 have to take the RMD in the year they are 71 but not yet 72?
The bill, section (d):

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Spirit Rider
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Spirit Rider »

A lot of commentary and posts on this forum state that spouses, individuals not more than 10 years younger, individuals with disabilities and minor children are exempt.

The last one is misleading. Minor children are only exempt until they become adults. Then the 10-year rule applies.*

*At least that was how the original text of the Secure Act was worded. I have not read the relevant text of what was actually passed.
ChrisC
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by ChrisC »

hoffse wrote: Sat Dec 21, 2019 7:45 am The limitations on the stretch IRA have an enormous impact on heirs.

My parents and I have been tracking this since the spring. My parents have a couple of very large traditional IRAs, and they just retired in the last year. I am very lucky (and grateful!) that they are going to aggressively convert almost all of it to Roth over the next few years while the lower rates of the TCJA are in effect and while they are both alive and can convert under the higher married threshold. They will hold back a limited amount for charitable giving and long term care, but the rest of it is getting converted.

Why? Because I have been in a higher tax bracket than they are for the last several years, and it appears that this will continue indefinitely while my husband and I are in our working years (we are 32 and 33 so we have a long way to go). And in the event they live long enough for me to also be retired by the time they pass, a large traditional IRA would totally screw up my own tax planning in retirement.

I’m grateful that they are willing to take that tax hit for my family. And my husband and I intend to do the same for my 2 year old son’s future family, pending any additional changes to these rules in the future.
I'm not so sure about the "enormous impact on heirs." Like your parents, my wife and I have been aggressively converting our tIRAs and traditional 401Ks/457b's to Roth IRAs since we retired in 2013, and we set up our legacy plans for our children, ages 38, 34, and 33, to take advantage of conduit trusts for stretching Roths or whatever remans in tIRAs. We've been converting deep into the 24% tax bracket, and two or our children are already in the 32nd and 35th brackets, and the other in the 24th bracket.

For us, ages 68 and 66, the increase in RMD age to 72 really helps us out in conversions; we will still likely not convert all of our traditonal tax defferred accounts to Roths, but the increase in time to do conversions will really help out. As far as the elimination of the stretch, 10 years strikes me as more than ample time for heirs to handle stuff, whether in traditional accounts or Roths. And with heirs at high income brackets, enough is enough, and high income heirs should be able to handle their own financial stations in life.
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willthrill81
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by willthrill81 »

Spirit Rider wrote: Sat Dec 21, 2019 11:18 am A lot of commentary and posts on this forum state that spouses, individuals not more than 10 years younger, individuals with disabilities and minor children are exempt.

The last one is misleading. Minor children are only exempt until they become adults. Then the 10-year rule applies.*

*At least that was how the original text of the Secure Act was worded. I have not read the relevant text of what was actually passed.
That is indeed how it was passed. But when do children cease to be minors for this purpose? It varies from state to state, usually 18, but in some it's 21, and in a few it's 19.
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Spirit Rider
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Re: Changes to 401(k) and IRAs, SECURE Act - It's signed

Post by Spirit Rider »

willthrill81 wrote: Sat Dec 21, 2019 11:58 am That is indeed how it was passed. But when do children cease to be minors for this purpose? It varies from state to state, usually 18, but in some it's 21, and in a few it's 19.
It could be 18, but it is most likely based on state law. That would mostly still be 18, except in AL/NE (19) and MS (21).
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