Higher Age For Retirement Benefit Withdrawal

Cadrene Heslop

Future retirees may get more time to gain money that is not taxed when they or their heirs access it.

A provision of the federal retirement bill cleared the House of Representatives. It speaks to required minimum distributors or RMDs. RMD is money that must get withdrawn every year from qualified retirement accounts. Qualifying retirement saving accounts include 401(k) plans or individual retirement accounts. The bill proposes the RMD age get raised from 72 to 75. (source)

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For the age to change, the provision will have to get accepted by Congress. Afterward, the benefit would go to those who move assets to a Roth IRA from traditional 401(k) plans or IRAs. (source)

Taxes will apply to the amounts converted. But during the owner’s lifetime, Roth accounts have no RMDs. And qualified withdrawals down the road are tax-free, which is different from traditional 401(k) plans and IRAs. (source)

CPA Jeffrey Levine is the chief planning officer at St. Louis Buckingham Wealth Partners. Levine said, "Say in the past a person retired at 65 and had seven years to do conversions — they’d potentially have 10 years to do those conversions in a tax-advantaged manner. This is a benefit for the wealthy, looking to use their IRA more as a wealth-transfer account than a retirement account."

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