New retirement rule is a boon for wealthy seniors

The new pension rules in legislation signed into law by President Biden in December contain several changes to the withdrawal requirements for retirement accounts that are scoring big for wealthy seniors.

The new law raises the age at which you must start withdrawing the required minimum, or RMD, from individual retirement accounts (IRAs), 401(k) and 403(b) plans to 73 this year, up from 72. This requirement will reach the age of 75 in 2033.

Another provision excludes RMD from Roth billing in 401(k) employer plans starting in 2024.

“For affluent clients, this is good news as they generally don’t need an RMD,” Eileen O’Connor, a certified financial planner and co-founder of Hemington Wealth Management, told Yahoo Finance. “And since all these distributions are taxable income, [that] can push them into higher tax brackets.”

But for everyone else, an increase in RMD does not contribute much to their financial security after retirement.

The amount of money you are required to withdraw each year is based on an IRS calculation based on your account value and life expectancy.

For people who are not dependent on money set aside in their retirement accounts to pay for living expenses, who are forced to cash out from tax-protected accounts such as IRAs and 401(k) plans every year since government-mandated age, no profitable from a financial point of view.

For these retirees, who have many other sources of income to fund their lifestyle, the ability to continue accumulating tax-deferred savings could be an important factor in their future financial security, and even for their heirs.

And here’s why: many Americans can live in retirement for three decades. The median retirement age among retirees is now 61, up from 57 in 1999, according to a 2022 Gallup Poll. grows, the more likely they are not to survive it.

Lovely senior couple on the beach.  a mature adult after retirement spends the weekend walking on the sandy beach in the evening.

(Getty creative)

The truth, however, is that most workers need the money they have saved up sooner rather than later.

“It’s probably about a third of households that have saved up a significant amount to use in retirement,” Mark Miller, pension expert and author of a new book, Retirement Reset: Sound Fiscal Strategies to Get Back on Track, told Yahoo Finance earlier.

Two-thirds of those who did not remain.

In fact, an alarming percentage of workers use their retirement savings before retirement, according to the latest Transamerica Retirement Survey of Workers. More than 1 in 3 workers (37%) have taken out a loan, early withdrawal, and/or a bailout from their 401(k) or similar plan or IRA, which can have costly consequences.

And for those who are already taking their RMDs, only a fraction of them take off the minimum.

“According to Treasury Department statistics, 8 out of 10 people covered by the RMD are already taking more than the minimum because they need the money,” Slott said.

The harsh reality is that “a very small percentage of people who will actually benefit from change” regarding RMD, Alicia Mannell, director of the Center for Retirement Research at Boston College, told Yahoo Finance. And most of these people are those who can already afford to retire, not those who are struggling in their golden years.

“I think this is a terrible position because it is only meant to make rich people even richer,” Mannell said. “Who can afford to wait? Only those who have a lot of money.”

Kerry is a senior reporter and columnist for Yahoo Finance. Follow her on Twitter @kerrihannon.

Click here for the latest economic news and economic indicators to help you make your investment decisions.

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for An Apple or android

Follow Yahoo Finance at Twitter, facebook, Instagram, flipboard, LinkedInand YouTube

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button