{"id":425807,"date":"2022-04-02T23:48:00","date_gmt":"2022-04-02T20:48:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/brett-arendss-roi-ira-required-distribution-rules-are-bad-policy\/"},"modified":"2022-04-02T23:48:00","modified_gmt":"2022-04-02T20:48:00","slug":"brett-arendss-roi-ira-required-distribution-rules-are-bad-policy","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-ira-required-distribution-rules-are-bad-policy\/","title":{"rendered":"#Brett Arends&#039;s ROI: IRA \u2018required distribution\u2019 rules are bad policy"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a24d4de9ee10\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a24d4de9ee10\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-ira-required-distribution-rules-are-bad-policy\/#%E2%80%9CBrett_Arendss_ROI_IRA_%E2%80%98required_distribution_rules_are_bad_policy%E2%80%9D\" >&#8220;Brett Arends&#039;s ROI: IRA \u2018required distribution\u2019 rules are bad policy&#8221;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-ira-required-distribution-rules-are-bad-policy\/#Why_dont_we_just_get_rid_of_RMDs_altogether\" >Why don\u2019t we just get rid of RMDs altogether?<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-ira-required-distribution-rules-are-bad-policy\/#Brett_Arends\" >Brett Arends<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CBrett_Arendss_ROI_IRA_%E2%80%98required_distribution_rules_are_bad_policy%E2%80%9D\"><\/span>&#8220;Brett Arends&#039;s ROI: IRA \u2018required distribution\u2019 rules are bad policy&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"Why_dont_we_just_get_rid_of_RMDs_altogether\"><\/span>\n  Why don\u2019t we just get rid of RMDs altogether?<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000736572\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000736572\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Dear Congress,<\/p>\n<p> Now that you are taking another crack at retirement planning with the so-called SECURE Act 2.0, including the vexed issue of required minimum distributions from IRAs, could you do yourself\u2014and everyone else\u2014a big, big favor?<\/p>\n<p><strong>Read:<\/strong> The Secure Act 2.0 \u2013 Americans\u2019 retirement security is top of mind for Congress this year<\/p>\n<div class=\"paywall\">\n       Don\u2019t extend the date for starting RMDs from 72 to 75. Don\u2019t extend it from 72 to 74 and then to 75. Don\u2019t extend it to 80. Don\u2019t reel it back to 70 \u00bd.<\/p>\n<p><strong>Read: <\/strong>RMD age may rise to 75 as House passes Secure Act 2.0. Here\u2019s what to know<\/p>\n<p>Why don\u2019t you just get rid of required minimum distributions altogether?<\/p>\n<p>Or do you just like needlessly complicating everything?<\/p>\n<p>For the uninitiated, \u201crequired minimum distributions\u201d are the amount that you have to start withdrawing as taxable income every year from your traditional, pretax IRA. They are calculated using the kind of financial gymnastics that sound like a joke until you realize it\u2019s serious.<\/p>\n<p>You might have to calculate your annual withdrawal using something called the \u201cuniform life expectancy\u201d tables. That\u2019s if you\u2019re unmarried, or you\u2019re married and your spouse is less than 10 years younger than you, or you\u2019re married and your spouse isn\u2019t the sole beneficiary of your IRA.<\/p>\n<p>Got that?<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>There\u2019s another table to use if you\u2019re married, and your spouse is more than 10 years younger than you, and they are your sole beneficiary.<\/p>\n<p>And there\u2019s yet another table to use if you\u2019re a beneficiary of an IRA and you aren\u2019t the spouse.<\/p>\n<p>The IRS publishes a helpful set of worksheets, because they seem to think that when you\u2019re retired you have nothing better to do.<\/p>\n<p>Hard to believe, but the rationale for these RMD rules is something mind-numbingly simple. The U.S. government, quite reasonably, doesn\u2019t want IRA tax breaks to be used as an inheritance tax freebie. The purpose of giving you a tax break when you save money in your IRA is solely for your own retirement security. It\u2019s not so you will have more money to hand on to Chad, Brad and Mitzi when you join the choir invisible.<\/p>\n<p>Tax attorney Albert Feuer, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/papers.ssrn.com\/sol3\/cf_dev\/AbsByAuth.cfm?per_id=508291\" class=\"icon none\">an expert in this field<\/a>, tells me RMDs \u201cwere first introduced in 1962 for so-called Keogh Plans, i.e., pension and profit-sharing plans of businesses operated as sole proprietorships or partnership. The original purpose of was to assure that tax-advantaged retirement plans were used primarily for the retirement of the participant and the participant\u2019s spouse.\u201d He adds, \u201cThis was before the 1974 introduction of IRAs. The RMD rules now <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ly not only to IRAs but to tax-advantaged employer profit-sharing and pension plans and now permit payments to be stretched beyond the lives of the participant and the participant\u2019s spouse.\u201d<\/p>\n<p>Fair enough.<\/p>\n<p>But it raises the simple question: If that\u2019s the purpose, why doesn\u2019t the IRS just\u2026er\u2026wind up your IRA when you die and tax it then?<\/p>\n<p>Sounds simple, right?<\/p>\n<p>It\u2019s so simple that, as Feuer points out, this exactly what they do with Health Savings Accounts, a cousin of the IRA designed specifically for health expenses. You can save tons of money in your HSA over the years. You can spend that money\u2014not just tax-deferred but tax-free, actually\u2014for medical expenses, something that is especially helpful in your senior years. And there are no required minimum distributions. None.<\/p>\n<p>When you die, your HSA gets wound up, the money distributed to your estate and included in your final year\u2019s taxable income. So you get full and free use of it during your lifetime, without any crazy rules, and your kids and grandkids don\u2019t get any of the tax break after you\u2019re gone.<\/p>\n<p>Simple, really. Who knew?<\/p>\n<p>\u201cThe problem with RMD\u2018s is that they are confusing and complicated for seniors,\u201d says Robin Giles, a Certified Financial Planner with Apex Wealth Management in Katy, Texas. \u201cIt\u2019s easy for seniors to miscalculate, or even forget about accounts, and the penalties for missing an RMD are extremely onerous.\u201d<\/p>\n<p>Required distributions, she adds, aren\u2019t just \u201can extra hassle\u201d for seniors, but in many cases damaging. Seniors are forced to take distributions when they don\u2019t need them, but don\u2019t know what to do with the money. Often the RMDs \u201cgo right into their checking account and get spent, without regard to the needs they may have in the future,\u201d she says. Net result: Government ends up having to spend more money helping them out later when they get in trouble.<\/p>\n<p>If retirees don\u2019t need the money at the time, she says, \u201cwhy not let them hold on to a little more of their nest egg for the years when they do have higher expenses and have a need for the money.\u201d<\/p>\n<p>All excellent points \u2014 coming from someone who deals with ordinary Americans with real financial issues every day.<\/p>\n<p>The RMD rules for IRAs don\u2019t even do what they are supposed to do. They are supposed to wind up your IRA over your final decades, based on life expectancy tables. But in reality you can die with lots of money still in the account. If you and your spouse have both died, and the accounts pass on to your heirs, they then have another 10 years to wind up the IRA using their own RMD rules.<\/p>\n<p>Mind-boggling. Really. And people wonder why the U.S. tax code is now about 8 times longer than <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/taxfoundation.org\/how-many-words-are-tax-code\/\" class=\"icon none\">War &amp; Peace<\/a>.<\/p>\n<p>And Congress wonders why <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/news.gallup.com\/poll\/1600\/congress-public.aspx\" class=\"icon none\">4 times as many Americans disapprove of the job they do as approve<\/a>. <\/p>\n<p>More <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.ipsos.com\/en-us\/news-polls\/americans-believe-crashed-ufo-spacecrafts-held-at-area-51\" class=\"icon none\">Americans believe that the government is hiding aliens at Area 51 than believe Congress is doing a good job<\/a>. That\u2019s not a rhetorical point. It\u2019s mathematically correct. The numbers aren\u2019t even that close.<\/p>\n<p>The current rules also mean that Uncle Sam goes without that tax money for another 10 years after the intended beneficiary dies. It\u2019s great precisely for people who need it the least.<\/p>\n<p>So, instead of solving a simple problem with a simple solution, the government instead tried to solve it with an overcomplicated solution that didn\u2019t entirely work, requiring a second, inefficient \u201cfix\u201d to fill in the holes.<\/p>\n<p>Facepalm. D\u2019oh!<\/p>\n<p>If that sounds familiar, it means you may have also paid attention to the quasi-hilarious, dark, Kafkan nightmare known as the Alternative Minimum Tax. Fifty years ago Congress discovered that over the years it had inadvertently made the U.S. income tax code so convoluted and absurd that many very rich people were able to get around it pretty much altogether. But instead of doing the obvious, common sense thing\u2014simplifying the code\u2014Congress decided instead to double down on the complexity. So they created a second, parallel tax code, the AMT, allegedly to fill in the gaps left by the first one.<\/p>\n<p>You can\u2019t make these people up. And they are running our lives.<\/p>\n<p>Meanwhile: Congress, please end RMDs on IRAs and just make the rules the same as they are for HSAs. If you need an incentive, please check the point about Area 51 above.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Brett Arends\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/brett-arends\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/BrettArends\",\"text\":\"@BrettArends\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:barends@marketwatch.com\",\"text\":\"barends@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Brett_Arends\"><\/span>Brett Arends<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><ufc-follow-author-widget product=\"marketwatch\" author-id=\"209_MW\" author-name=\"Brett Arends\" signin-url=\"https:\/\/accounts.marketwatch.com\/login?target=https%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fira-required-distribution-rules-are-bad-policy-11648656098%3Frss%3D1%26siteid%3Drss\" panda-api=\"https:\/\/follow-api.marketwatch.com\"><\/ufc-follow-author-widget><\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-7B3D-3C2EC7BF7FAA%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Brett Arends&#039;s ROI: IRA \u2018required distribution\u2019 rules are bad policy&#8221; Why don\u2019t we just get rid of RMDs altogether? Dear Congress, Now that you are taking another crack at retirement planning with the so-called SECURE Act 2.0, including the vexed issue of required minimum distributions from IRAs, could you do yourself\u2014and everyone else\u2014a big, big&#8230;<\/p>\n","protected":false},"author":1,"featured_media":425808,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.mktw.net\/im-514612\/social","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-425807","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/425807","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=425807"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/425807\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/425808"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=425807"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=425807"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=425807"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}