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I forgot to mention that PlanAdvisor claims that 68% of those with tax deferred accounts only withdraw the minimum RMD amount each year.
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This Secure Act is essentially just a money grab. Don't expect to ever trust a gov't program again.

IP
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IP writes,

This Secure Act is essentially just a money grab. Don't expect to ever trust a gov't program again.

</snip>


I assume you're referring to the changes to non-spousal inherited IRAs which requires liquidating (and paying taxes on) the balance of the account within 10 years. I'm good with that.

Congress designed IRAs as "Individual Retirement Accounts", not as tax-preferred wealth transfer schemes. Congress expected you to spend most of the IRA money while you're still alive.

Back in the early 1990's when I was getting serious about retiring early, one thing that caused me to pull the trigger was the 15% penalty on IRA withdrawals in excess of $160,000/yr. At my then current rate of savings, a 4% withdrawal would have breached that limit by about age 42 or so. No sense working longer just to pay more taxes on money you're not spending anyway.

Phil (Senator from Enron) Gramm got the "$160,000/yr IRA tax" repealed in 1997.

https://money.cnn.com/magazines/fortune/fortune_archive/1997...

intercst
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This Secure Act is essentially just a money grab.

The Secure Act is revenue neutral, so it can't really be described as a government money grab. It is a redistribution of the tax benefits and some are winners and some are losers. Delaying RMDs to 72 is a tax break, while limiting inherited IRAs is a tax increase. I guess if you meant it is a money grab by those who get to delay their RMDs from those with inherited IRAs, then OK.

Don't expect to ever trust a gov't program again.

You should never trust a government program to not change. They have always changed and they always will. It's one of the risks we live with. Reagan introduced taxes on social security and increased full retirement retirement age. Decades of tax-free social security and suddenly it's taxable?! That's a much bigger hit for many than removing stretch IRAs, and it was signed by the great tax cutter himself. Taxes on social security were then raised in 1993. Divorced wives first got social security benefits from their exes in 1965, divorced husbands had to wait until 1977. When I hear people argue against forgiving student loans because its unfair to those who paid theirs back already, I think of those people who stayed in horrible marriages so they would one day get social security benefits suddenly being told they would get them anyway, even if they had divorced decades earlier. Roth IRAs seem great today but if income tax is ever replaced with a national sales tax, those benefits go poof!
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Congress designed IRAs as "Individual Retirement Accounts", not as tax-preferred wealth transfer schemes. Congress expected you to spend most of the IRA money while you're still alive.

Congress' actions is filled with unintended consequences. Once in a while it's nice to have it be a positive consequence. Bottom line is they set the rules and then when our money was held captive, they changed the rules.

I'm sure that without kids you don't care about the changes and are fine with the Fed's tax grab. We always intended on using it as an estate plan, making sure our kids would never be dependent on the gov't for their care. AND we were just following the rules that anyone could have also benefited from.

Unless it's a benefit that the fat cat house and congress can benefit from, don't count on it staying long term. Medicare for all? Not going to happen, unless of course once again the congress and house are exempt from the law.

IP,
putting in an offer on another rental property today, figuring step up in basis is going to be one of the last perks to go by the wayside since fat cats benefit from it greatly
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The Secure Act is revenue neutral, so it can't really be described as a government money grab.

Sure it can, since it will trigger large amounts of Roth Conversions for anyone who anticipated using IRAs for the Stretch IRA benefit. With the insane spending and huge deficit, tax breaks to the 1%, the money has to be had now, and can't be waited for in the future. I would gladly go back to the 70.5 RMDs.

...but if income tax is ever replaced with a national sales tax, those benefits go poof!

This is about politicians wanting to put a band aid on things they messed up and take tax money away from when it was going to come in the future when they are no longer responsible. Almost guarantees some sort of additional value added tax down the road. Won't be instead of income tax, but in addition to.

IP,
not a spender and would most likely do better under a value added tax than income tax
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... they're already taking more than the RMD from their retirement account.

https://www.cnbc.com/2020/02/13/those-annoying-required-with...


I'm not sure where CNBC got their data for claiming that only 20.5% withdraw their minimum RMD amount.

PlanAdviser claims that only 21% are willing to withdraw more than the RMD amount.

https://www.planadviser.com/retirees-withdrawing-required-mi...

Their information came from TD Amertrade. I suspect that Vanguard and Fidelity have similar statistics to TD Ameritrade based on the tax deferred accounts for which they are custodians.
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I forgot to mention that PlanAdvisor claims that 68% of those with tax deferred accounts only withdraw the minimum RMD amount each year.
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I'm not sure where CNBC got their data for claiming that only 20.5% withdraw their minimum RMD amount.

According to the article, it was an IRS estimate that in 2021 only 20.5% would take the minimum RMD.

One would think the IRS has some experience to calculate that estimate. Maybe.

AW
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