"It is generally agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges." - John Maynard Keynes

SavingAdvice.com Blog

Bridging the gap between saving money and investing


Join Now or Login

RMD

What You Need to Know About Trump’s Proposed Changes to Required Minimum Distributions

By 8 Comments

Required Minimum Distributions

Early retirement planning is the smart way to make your retired life better. Retirement savings are extremely important. Millions of Americans use IRAs and 401(k)s to save up for their golden years. These tax-deferred accounts provide a tax break now.  The agreement is that they’ll pay taxes on it in retirement. Once you begin to withdraw from your IRA or 401(k), there is a required minimum distribution.  You must adhere to the distribution to avoid paying a hefty penalty.

For years, people have looked at these laws as unfair. After all, many people save their entire lives to be able to retire comfortably just to be hit with fines. However, President Trump has signed an executive order that will lead to a change in these rules. The new change is mainly loosening the requirements for minimum distributions.

About Required Minimum Distributions

Required minimum distributions (RMD) are put into place to limit the tax benefits retirement savers are able to receive. RMD rules state you must begin taking withdrawals from retirement account the year you turn 70 1/2. Account holders must calculate the amount they have to take out each year, regardless of whether they need it or not. For many people, this has increased the likelihood of running out of money during retirement.

President Trump Calls for Changes

Last week the president signed an executive order calling for the Department of Labor and Department of Treasury to consider two things. First, he wants to raise the age when people are required to start taking the RMD. Second, Trump would like to find a way to make it easier for small businesses to offer retirement plans for employees.

He has given the Department of Treasury six months to consider pushing back the age because many Americans are outliving their retirement. The current average life expectancy in the U.S. is 78 1/2. Additionally, he has given the Labor Department six months to consider easing regulations that would allow small businesses to offer retirement plans. This would give the opportunity to save for retirement to more than 42 million employees in the U.S.

Financial advisors helping retirees are hopeful that the order will lead to more relaxed RMD rules or, even better, the removal of the rules altogether. However, even if the executive order pans out, it could take years for the rules to change. It also isn’t clear whether a simple rule change can be done without congressional approval.

Either way, if you have an IRA or 401(k) that you don’t need to tap into right away, these changes could make a huge difference in your financial plan for retirement. For many, it would mean having more security than ever.

Readers, what do you think about President Trump’s proposal?

Read More

Most Retirees Need To Start Tax Preparation By Dec. 31

By 1 Comment

Retirees Need To Start Preparing Taxes

The Internal Revenue Service (IRS) is reminding taxpayers born before July 1, 1945, that they must receive payments from their individual retirement arrangements (IRAs) and workplace retirement plans by Dec. 31.

Required minimum distributions (RMDs) are payments that normally must be made by the end of 2015, however, a special rule allows first-year recipients of these payments to wait until as late as April 1, 2016 to receive their first RMDs. People born after June 30, 1944 and before July 1, 1945 are eligible for this special rule.

This is the second in a series of weekly tax preparedness releases designed to help taxpayers begin planning to file their 2015 return. If you’re looking for a fun way to grow your tax return this year, use this 888 ladies promo code to get great online casino perks.

These distribution rules apply to people who receive Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs as well as participants in various workplace retirement plans, like 401(k), 403(b) and 457(b) plans. However, they do not apply to Roth IRAs while the original owner is alive.

An IRA trustee must report the amount of the RMD to the IRA owner. Trustees can also offer to calculate it for the owner.

The special April 1 deadline only applies to the RMD for the first year. After the first year, the RMD must be made by Dec. 31 (year’s end). For example, a taxpayer who was born after June 30, 1943 and before July 1, 1944 and received the first RMD for 2014 on April 1, 2015, must still receive a second RMD by Dec. 31, 2015.

RMD for 2015 is based on the taxpayer’s life expectancy on Dec. 31, 2015, and their account balance on Dec. 31, 2014. For a taxpayer who turned 72 in 2015, the required distribution would be based on a life expectancy of 25.6 years.

Though the RMD rules are mandatory for all owners of traditional, SEP and SIMPLE IRAs and participants in workplace retirement plans, some people in workplace plans can wait longer to receive their RMDs. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. Employees of public schools and certain tax-exempt organizations should check with their employer to see if they need to comply with this rule as well. When in doubt, check with your employer or check the IRS website.