New date for RMD from IRA
- Thread starter Stuffshot
- Start date
Wonder if the old rule that in the first year you didn't have to take the first withdrawal until April 15 of the next year applies? However, that would mean that you'd have to take two the second year.
They also did away with stretching an inherited IRA over the lifetime of the person that inherited it. They now have to get the money out with 10 years I believe.
Slight hijack...
This is why most people should just buy indexed funds.
Quoting the article:
This is why most people should just buy indexed funds.
Quoting the article:
- Nevertheless, investors in most cases would have done better in low-cost index funds. The S&P 500 index returned 33% in 2019, including dividends, beating the average large-cap stock fund by eight percentage points (assuming the index fund charged close to zero in fees).Just 29% of active U.S. stock fund managers beat their benchmark after fees in 2019. That declined from 37% of funds beating their benchmarks in 2018, the average success rate over the past 15 years.
Yes, the change to taking it out over 10 years for nonspousal inherited accounts is huge. I am meeting with my elderly dad and his advisors Friday to discuss options. At 47, the last thing I need is to receive a chunk of money that is going to taxed very heavily.
Even thought about skipping a generation but all the grandkids are early to mid-teenagers not ready to receive that kind of money. You guys have any ideas or suggestions to counter the loss of the stretch IRA?
If your dad is well off he should (IMO) be giving money to the people he wants to get it. That's what we're doing. You can give up to $15,000 to as many people as you want without filing a gift tax return.
Yeah really need to know more details. One thing I should have done (and didn't) is started rolling my IRA money into a Roth several years ago.
When my wife has to start taking money out of her IRAs we're gonna get killed on taxes and Medicare premiums (already there on that
)Just pay your taxes. We have a large federal deficit that you can assist with.
Thanks. Not a huge estate, but north of $2 million which ain't bad for a guy growing up without indoor plumbing. Problem is, it is just him now and at age 78 between social security and RMDs, his income is north of 80k.Yeah really need to know more details. One thing I should have done (and didn't) is started rolling my IRA money into a Roth several years ago.
When my wife has to start taking money out of her IRAs we're gonna get killed on taxes and Medicare premiums (already there on that
I thought of just having him start gifting more heavily now. Guess either way the gov will get their money. Just more quickly now. Appreciate any additional insights.
Well there's no taxes on gifting in Indiana .... no federal or state. Some states still have an estate tax.
Of course if you give away more than 11.4 million then the federal limit kicks in but the 11.4 million applies to both husband and wife.
It may be better for you if he starts doing Roth IRA conversions. Yeah he'll have to pay some taxes now..... but seems to me it will be a lot less than If you inherit a $2m IRA and have to take $200k/yr+ for a decade... on top of your normal income.
Big question is his health. If healthy, he may be around a very long while..... which changes the discussion.
I know this was sarcasm, but why is this such an outrageous statement? The wage slaves are paying their taxes...
I know when my mom died and we distributed her assets, me and my brothers did have to pay some taxes. I can't speak for them, but it didn't bother me in the least. I was grateful to get what I got.
Inheriting an IRA is massively different scenario.
If he inherited $2m in investments, cash, whatever
..there would likely be zero taxes due.... pls his own cost basis would step up to current market value.
if he inherits a $2m IRA.....I could easily see him paying $600-700k (probably more with investment gains) in taxes over the next decade as he's forced to distribute it out.
So he'd be $1.3M-1.4M ahead, right? Bummer.
I don't remember the exact numbers, but my share was in the high five figures and I paid my usual low tax rate on the gain. Again, I was happy for what I got. It all got invested, and it will help me stay above the poverty level in retirement.
It might have been about 1/2 sarcasm, but really I don't have a major problem with it. A 10 year stretch still will help significantly.
I don't have a major issue with it as a stand alone policy... however you have people who plan estates a certain way only to have the rug pulled out from them by the govt changing policy effective immediately. This amounts to a fairly sizable stealth tax increase that mostly impacts the upper middle class. Not really consequential for the wealthy, as IRAs aren't a sizable part of their estates.
Keep in mind, most estate plans are created to help with estate taxes, not taxes paid from IRA distributions. Just because you must withdraw income quicker from an IRA than before probably has little to no affect on the overall estate plan. Maybe push you to a higher marginal bracket, that would be about it.
True.... but I'm not really referring to what's formerly called "estate planning" in regards to estate taxes.... that's not applicable to many people these days.... generally need an estate in excess of $11m in assets before it becomes much of an issue.
I'm referring more to the general planning that people do... even if mainly on their own. Obviously for many, many people..... they (or their heirs) would now be much better off either doing Roth conversions.... or taking much larger IRA withdrawals and reinvesting the after- tax proceeds in taxable accounts.... over leaving a large IRA to working aged children.
These kind of ad- hoc rule/tax changes always make me a little leery of tax advantaged accounts. What the govt gives they can quickly take away. Wouldn't be surprised to see the day where things like Roth distributions are means tested and taxed.
One might also consider that an IRA is an Individual Retirement Account, intended for that person to use during his retirement, rather than as an asset held for his heirs. The tax incentives are geared toward that purpose. When the money isn't used for that purpose, it makes sense that those incentives be clawed back in some fashion.
As I said above.....I agree with that in principle, entirely. Just think phasing in these changes is the fairer thing to do.... instead we got a bill that was passed in the last half of Dec that's effective Jan 1. I understand it was really a revenue grab to be used for pay-fors for other aspects of the bill.
The absurdity of relatively small pay-fors when we have a $1T+ annual deficit is a discussion for another day.
Yeah depending on what tax bracket he's in. It would be tax as ordinary income but he could spread receiving it over 10 years.
One of the downsides of an IRA is that when you take money out it's taxed as ordinary income whereas if was in a taxable account you will have to pay only the capital gains tax rate of at least part of it.
Similar threads
