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Nominally, if a retired couple had $1 million in traditional IRA accounts (rollover 401k's, etc.) after age 70.5 years (both the same age); the required minimum distribution would force a withdrawal of about $35,000 in the next tax year, whether the couple needed or wanted the money or not.
Now to outside clean up and check for other damage after the violent storm front Sunday evening with 65 mph in our area.
Stay safe Catch...my understanding is that the age RMD is triggered hasn't ever been adjusted upward, maybe it should be. Average age of death is now 78, not 74. Maybe RMD should be 74 for a 4 year recapture of taxes. Basically, tax need to be collected on tax deferred contributions and the potential growth of IRAs.
I'm in the camp that the contribution should be taxed as earned income (which it would have been originally if it wasn't placed into an IRA), but the deferred growth in IRAs should be taxed more like it is in taxable accounts (as long term capital gains). Fairness is the key when it comes to taxation.
RMD will shift dollars from IRA accounts into individual taxable accounts and government tax collection accounts.
In 2001(see p. 87), someone aged 70 was required to divide by 26.2. In 2012 (see p. 109), that divisor had been increased to 27.4.
So the tables have changed. Not recently, though - I spot checked 2008 and found the same values in Table III as in the current Pub 590.
Also, be careful when you talk about average life expectancy. The tables reflect the average life expectancy for someone living at that particular age. That's why the divisor doesn't drop a full year for someone one year older. The longer you live, the higher your expected age of death becomes.
(Note: for nonspouse inherited IRAs, one does reduce the divisor by one year each year, but that's not a recalculated life expectancy, just a tax rule.)
Say the average life expectancy (at birth) is 78. Now consider all the 80 year olds (who are alive). Surely they are all expected to live past 78. So by living longer they have extended their average life expectancy.
Comments
Now to outside clean up and check for other damage after the violent storm front Sunday evening with 65 mph in our area.
Stay safe Catch...my understanding is that the age RMD is triggered hasn't ever been adjusted upward, maybe it should be. Average age of death is now 78, not 74. Maybe RMD should be 74 for a 4 year recapture of taxes. Basically, tax need to be collected on tax deferred contributions and the potential growth of IRAs.
I'm in the camp that the contribution should be taxed as earned income (which it would have been originally if it wasn't placed into an IRA), but the deferred growth in IRAs should be taxed more like it is in taxable accounts (as long term capital gains). Fairness is the key when it comes to taxation.
RMD will shift dollars from IRA accounts into individual taxable accounts and government tax collection accounts.
Here's Pub 590 from that year: http://www.irs.gov/pub/irs-prior/p590--2001.pdf
Here's the current Pub 590: http://www.irs.gov/pub/irs-pdf/p590.pdf
In 2001(see p. 87), someone aged 70 was required to divide by 26.2.
In 2012 (see p. 109), that divisor had been increased to 27.4.
So the tables have changed. Not recently, though - I spot checked 2008 and found the same values in Table III as in the current Pub 590.
Also, be careful when you talk about average life expectancy. The tables reflect the average life expectancy for someone living at that particular age. That's why the divisor doesn't drop a full year for someone one year older. The longer you live, the higher your expected age of death becomes.
(Note: for nonspouse inherited IRAs, one does reduce the divisor by one year each year, but that's not a recalculated life expectancy, just a tax rule.)