Changes to Required Minimum Distributions?

Big news for those facing the challenge of Required Minimum Distributions…

Last week President Trump signed an executive order asking the IRS to review its regulations concerning Required Minimum Distributions “RMD”. For those unfamiliar with RMDs, at age 70 ½ the government requires you to start taking taxable distributions from your IRA, 401(k) and other qualified accounts. This can create a significant tax problem for those who did a good job saving for retirement.

The amount taxed goes up every year. Any money left in the accounts after your death will continue to be taxed in a similar manner. The gift that keeps on giving.

It appears that the administration’s goal is to reduce the amount required to be taxed. On the face of it, this would reward savers. Those of you who were responsible enough to put money away in your retirement plans so that you could take care of yourself during retirement.

There are some arguments against reducing RMDs. It would disproportionately help the “rich”. It would reduce tax collections. It would increase the deficit.

We believe strongly in RMD management. There are a number of techniques we use to minimize or control RMDs. 

Why is this important?

If the current President can issue an executive order to try and reduce RMDs, it stands to reason that a future President could issue an executive order to try and increase RMDs. Increasing RMDs would increase tax revenues, help reduce the deficit and tax the “rich”. The last rationalization “tax the rich” isn’t fair because there are many responsible savers who are just average Americans.

But they could get caught up in the fervor of the moment.

This is another reason why it is so important to determine if RMDs will cause you to pay more than your fair share of taxes.

At TFG Wealth Management we are committed to making every effort to stay on top of issues that will impact your retirement. Its not just about managing your investments but also about getting the most out of your retirement savings for you and your family.