What? First I told you that the 2015 Federal Budget proposed RMDs for the Roth IRA, and now I’m saying no RMDs at all. Well, sort of.
The proposal eliminates the RMD from tax favored accounts (IRAs, 401(k)s etc.) if the prior year end balance was $100K or lower. To add a bit of complexity, it’s not a step function, it phases over $100K – $110K, so if your balance were exactly $105K, half the RMD calculated must be taken. More complex? Ok, the numbers will be indexed for inflation.
My assessment of the impact of this proposal? Needless. I look at any changes to the code and ask who it will help and who will it hurt. This will benefit the rare individual who has a sub-$100K IRA, but no need to withdraw any money. When you consider this, it’s an odd combination. I’m not going to lose sleep over this, only observe that the addition of more rules is counterproductive, and I’ll be on the lookout for the unintended consequence that will result – a well meaning retiree hoping to keep her IRA in tact, and passing it on to her kids, who are in the 28% tax bracket, while she might have just taken her RMDs out at 15%.
On a lighter note, I started this series mentioning the Budget and the Treasury’s General Explanations. Today, I discovered another document in the series, the 1438 page Appendix. A warning, it’s 13.2MB, so be patient if you are going to download it. It gave a remarkably in depth overview of where the money is going. Kind of like your household budget if you add quite a few zeroes.
More to come….