Possible changes to Required Minimum Distributions

The Wall Street Journal is reporting that Congress is considering possible changes to the Retirement Account rules that require taxpayers to take minimum annual withdrawals after age 70 1/2 – perhaps allowing to delay the withdrawals or reducing the required amount. There may also be some tax relief for taxpayers who have have already received the required minimum distributions (RMD) for this year.

These are changes that I proposed to Indiana senators Bayh and Lugar, and retirement industry experts, several weeks ago.

RMDs reduce account balances. This is not a good strategy for taxpayers who don’t need the money to live on and who want to keep compounding the money in the account, but the government wants distributions to occur so that they can be taxed.

The amount of the RMD is calculated on your retirement account balance at the end of the previous year. In general terms, if your account is worth 40% less now than last December, your RMD would be 40% less if calculated on today’s balances as opposed to last year’s balance. A lower RMD would leave more in the account to compound and grow. A higher RMD further depletes an already devastated account.

The time is now to strategically plan to stop wasting money on taxes you are not required to pay.