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Old Yesterday, 01:18 PM
 
Location: SLC
466 posts, read 426,541 times
Reputation: 822

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There seems to be seems to be some dubious reporting on this bill. I am hardly a proponent - but over-the-top criticism:

https://www.cnbc.com/2019/07/09/the-...thdrawals.html

The above link, for instance, argues that delay in the age requiring RMDs can make the participants worse off! I cannot rationally see that as possible as the delay merely adds new possibilities without removing what's possible now. After all, one can do the withdraw the amount currently required from the tax deferred accounts starting at 70 even though the official requirement doesn't become effective until 72.

[I should note that CNBC seems to specialize in the vacuous items of this sort.]

I can see the impact on the adverse inheritance, etc. but I do not really see that as a big negative.

The one negative I do see is the safe harbor to 401(k) plan sponsors from being sued for picking poor annuity providers. While not a fan of the litigious society we have become, I have unfortunately seen some poor retirement savings choices from companies [happens at smaller companies]. The safe harbor removes any structural discouragement for the employers for picking fly-by-night operators for these products.

https://theintercept.com/2019/05/22/...ment-accounts/

Last edited by kavm; Yesterday at 01:28 PM..
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Old Yesterday, 01:30 PM
 
3,270 posts, read 847,864 times
Reputation: 3779
Quote:
Originally Posted by ysr_racer View Post
Sorry, the two biggest changes I see are:

It pushes the RMD out to 72.5 and it forces non spouses that inherit your IRA to withdraw the funds in 10 years.

So if you leave your children a 1 million dollar IRA, instead of taking RMDs, they may have to take $100,000 a year until it's depleted. Thereby paying the taxes sooner.

Unfortunately it also raises the taxes of whoever inherited it.
Would it also penalize them the 10% early withdrawal if they're younger than 59.5? LOL
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Old Yesterday, 01:37 PM
 
1,001 posts, read 749,680 times
Reputation: 1995
Quote:
Originally Posted by Mr. Boring View Post
  • Relaxing rules on employers offering annuities through sponsored retirement plans
This is the bad part of the legislation. Plan administrators will be able opt people into low-yielding annuities as the plan's default investment rather than into target date/market index funds. Annuities way under perform the market in the long run. Currently an administrator's fiduciary duty prevents them from offering investments that will perform terribly over the long run. There is no need to relax this.

You would think people are motivated to look at their 401k, but a huge percentage of participants leave the money in the default investment. This is a boon for WallStreet but a lot of people will wonder (20 years from now) why their retirement fund only grew a few percent per year.

Last edited by Pfalz; Yesterday at 01:58 PM..
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Old Yesterday, 01:43 PM
 
Location: SoCal
13,221 posts, read 6,320,879 times
Reputation: 9827
Quote:
Originally Posted by ddm2k View Post
Would it also penalize them the 10% early withdrawal if they're younger than 59.5? LOL
They may have to drain it in 10 years per the house’s proposal.
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Old Yesterday, 01:44 PM
 
1,971 posts, read 2,718,849 times
Reputation: 3457
Quote:
Originally Posted by ysr_racer View Post
This is especially important to all you retirees with 1.7mil


I can't give you more rep today. YOU ARE SO FUNNY.
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Old Yesterday, 01:45 PM
 
29,775 posts, read 34,860,277 times
Reputation: 11697
Quote:
Originally Posted by ysr_racer View Post
Sorry, the two biggest changes I see are:

It pushes the RMD out to 72.5 and it forces non spouses that inherit your IRA to withdraw the funds in 10 years.

So if you leave your children a 1 million dollar IRA, instead of taking RMDs, they may have to take $100,000 a year until it's depleted. Thereby paying the taxes sooner.

Unfortunately it also raises the taxes of whoever inherited it.
IRA stands for Individual Retirement Account. Translated doesn't that mean a retirement planning account for the individual who opens it and their spouse? Not a family wealth transfer vehicle?

If you want it for your family after you are gone then distribute it and pay the taxes on it over the course of your life span. With draw at smaller amount, pay the taxes and reinvest it in a after tax account to pass on to your non spousal family members or roll it over or any one of a number options while you are living etc.
Just get it out of a account called IRA for the obvious reasons.
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Old Yesterday, 01:47 PM
 
Location: Ypsilanti, MI
2,439 posts, read 3,661,951 times
Reputation: 4790
Quote:
Originally Posted by Pfalz View Post
This is the bad part of the legislation. Plan administrators will be able opt people into low-yielding annuities as the plan's default investment rather than into target date/market index funds. Annuities way under perform the market in the long run. Currently an administrator's fiduciary duty prevents them from offering investments that will be perform terribly over the long run. There is no need to relax this.


Yes, even though I rolled a cashed-out pension (from a former employer which I no longer viewed as trustworthy, or even viable over the next 30-40 years) into an Annuity, that move is a far different animal than rolling a 401(k) into an annuity.

The pension was a commitment to provide me and my wife with a specified amount of annual funds, paid monthly, until we both died (a simplification ignoring survivor options). Whether we lived to 105 or only 68, "my balance" of the funds in the pension plan would not go to our heirs upon death. The annuity, again on a simplified basis, operates much the same as the pension in that regard.

On the other hand, surplus funds in a 401(k) at time of death will pass to your heirs. If a person rolls their 401(k) balance into an Annuity at time of retirement to create a "pseudo pension", these funds will not go to their heirs at time of death.
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Old Yesterday, 02:03 PM
 
1,001 posts, read 749,680 times
Reputation: 1995
Quote:
Originally Posted by MI-Roger View Post
Yes, even though I rolled a cashed-out pension (from a former employer which I no longer viewed as trustworthy, or even viable over the next 30-40 years) into an Annuity, that move is a far different animal than rolling a 401(k) into an annuity.

The pension was a commitment to provide me and my wife with a specified amount of annual funds, paid monthly, until we both died (a simplification ignoring survivor options). Whether we lived to 105 or only 68, "my balance" of the funds in the pension plan would not go to our heirs upon death. The annuity, again on a simplified basis, operates much the same as the pension in that regard.

On the other hand, surplus funds in a 401(k) at time of death will pass to your heirs. If a person rolls their 401(k) balance into an Annuity at time of retirement to create a "pseudo pension", these funds will not go to their heirs at time of death.

Great points. There absolutely are valid reasons to invest in an annuity and usually the timing is around your retirement date. Funneling financially unsophisticated people into annuities during the accumulation and growth stages of their retirement savings is just plain wrong and that's what this legislation is going to allow.
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Old Yesterday, 02:17 PM
 
3,995 posts, read 3,217,430 times
Reputation: 12987
The OP has some serious comprehension issues if he's thinking that article is about the government coming for our IRAs. Typical leftist garbage.
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Old Yesterday, 02:19 PM
 
8,837 posts, read 5,126,299 times
Reputation: 10096
Quote:
Originally Posted by kavm View Post
There seems to be seems to be some dubious reporting on this bill. I am hardly a proponent - but over-the-top criticism:

https://www.cnbc.com/2019/07/09/the-...thdrawals.html

The above link, for instance, argues that delay in the age requiring RMDs can make the participants worse off! I cannot rationally see that as possible as the delay merely adds new possibilities without removing what's possible now. After all, one can do the withdraw the amount currently required from the tax deferred accounts starting at 70 even though the official requirement doesn't become effective until 72.

[I should note that CNBC seems to specialize in the vacuous items of this sort.]

I can see the impact on the adverse inheritance, etc. but I do not really see that as a big negative.

The one negative I do see is the safe harbor to 401(k) plan sponsors from being sued for picking poor annuity providers. While not a fan of the litigious society we have become, I have unfortunately seen some poor retirement savings choices from companies [happens at smaller companies]. The safe harbor removes any structural discouragement for the employers for picking fly-by-night operators for these products.

https://theintercept.com/2019/05/22/...ment-accounts/
Now that I agree with. There is no need at all to have annuities inside a 401k. The insurance lobby has been hard at work.
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