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Required Minimum Distribution (RMD) Age Raised to 72

This will give you more flexibility in years to come as you manage your income tax costs. This is not to be confused with a Roth Contribution.
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Why is this important?

An income Tax Saving opportunity is created by adding years to the RMD. You now have 2 more years to control your income tax costs by saving more OR putting money into a Roth using a Partial Roth Conversion.  This will give you more flexibility in years to come as you manage your income tax costs.

Partial Roth Conversion

Note:

This is not to be confused with a Roth Contribution which has income requirements and restrictions.

This is not an ‘all or nothing’ decision.  You can choose any amount. That is why it is called Partial.  It can be any amount irregardless of income or account size.  However, you will have to pay tax on the amount you convert.

The Rule

Section 113. Increase in Age for Required Beginning Date for Mandatory Distributions under current law, participants are generally required to begin taking distributions from their retirement plan at age 70 ½ . The policy behind this rule is to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries. However, the age of 70 ½  was first applied in the retirement plan context in the early 1960s and has never been adjusted to take into account increases in life expectancy. The bill increases the required minimum distribution age from 70 ½ to 72.

Good News! You can wait nearly two more years to start taking the mandatory distributions from your IRA accounts. If it is money you don’t need, you have two more years to do a partial Roth conversion to control your income tax cost. This is likely the beginning of cascading changes coming in the near future as you will see in the Bonus Tip below.

Ask your CPA or us how you may be able to benefit from this change in Required Distributions. 

Bonus Tip

The IRS just released in November 2019 proposed updates to the Life Expectancy and Distribution Period Tables, which, if finalized, would also provide some relief to retirees by reducing the amount of RMDs owed each year to allow money to last longer in retirement. According to the EBRI report, it appears that a one- to two-year change in RMD beginning date would only have perhaps a 2% to 4% change in total Required Minimum Distributions. 

Rest assured, as we further evaluate this new piece of retirement legislation; we will continue to give you insights on what you need to know to not miss out on the opportunities that you may benefit from.

Obviously, no investment, tax or legal advice is given in this content.  Investment, tax, and legal advice is personal and private.  Investment advice offered through Versaille Capital Advisors, LLC, a Michigan Registered Investment Advisory Firm.

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