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New bills in Congress aim to raise RMD to 72 or 75 - will this change SEPP planning?  


Tracy
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(@tracy)
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Joined: 3 months ago

One of the reasons I decided to use the SEPP exclusion was so I could withdraw IRA funds more evenly over my lifetime. RMD rules gradually increase required distributions so that I was possibly facing huge tax bills in my 90's.  If the RMD is pushed out 5 years and those huge tax bills are pushed out another 5 years (therefore becoming an inheritance issue), then maybe I would have thought differently. What does everyone think - will new retirement laws impact SEPP planning?

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Tanko1
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I believe it may effect people's plans on the AMOUNT they may take in their SEPP (maybe not take max amount anymore), but I don't think it will effect people's plans to implement an SEPP. I also believe this is likely just one of many changes coming from congress over the next several years to hopefully start addressing the Soc Sec shortfall. I've always been worried some drastic measures may be implemented and I hope people are planning accordingly. For myself, I assumed for my financial planning that I would receive only 75% of the calculated Soc Sec payout expected when I do take those payments.

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dlzallestaxes@msn.com
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(@dlzallestaxesmsn-com)
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I have not seen any discussion or proposal for RMD to be increased to 75, but it is proposed to be increased to 72 in the SECURE ACT which passed the House overwhelmingly. This proposed bill is disastrous, and will eliminate STRETCH IRAs for non-spouse beneficiaries, especially kids. It will require non-spouses to distribute TIRA's within 10 years (in any one or over all of the next 10 years, at the option of each beneficiary). However, since this applies to RMD's, it will not really apply to SEPP 72-T planning, but will be critical for  PLANNING DURING RETIREMENT after age 59 1/2, when most SEPP 72-T plans will terminate, or soon thereafter.

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Tanko1
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(@tanko1)
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Hey, dallasTX. Glad to see you posting in the new forum.  Here is the article from May (2 months ago) that referred to this possibility. https://www.thinkadvisor.com/2019/05/14/new-retirement-bill-would-boost-rmd-age-to-75/?slreturn=20190626210413

Haven't heard much on it since so not sure it has any legs to go forward.

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dlzallestaxes@msn.com
(@dlzallestaxesmsn-com)
Joined: 2 months ago

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Posts: 3

Actually it has a lot of support. It passed the U S House easily, and there are only 2 senators who have any objections. One is Sen. Cruz who wants to include a provision for distributions for "home schooling", which professionals know will be impossible to monitor. I won a webinar yesterday by Ed Slott, IRA guru. He discussed 5 "solutions" to the SECURE ACT "when" it gets passed. One is aggressive use of ROTH CONVERSIONS between 59 1/2 and 70 1/2, and the other is life insurance using ILITs (Irrevocable Life Insurance Trusts) to fund the income tax liabilities that will occur over the 10 years after death, using the TAX-FREE proceeds from the life insurance policies.

By the way, the Senate version does propose raising the RMD age to 75, while the House version is 72.

 

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