Tax Reform: Ending Forced Retirement Withdrawals

As Republicans flesh out details of their tax plan, one target for reform should be the “required minimum distribution” (RMD) rules for retirement accounts. The rules generally require that people begin withdrawing from their 401(k)s, 403(b)s, and traditional IRAs at age 70½ whether they need the cash or not.The RMD rules are misguided, and policymakers should repeal them.In writingthis study on savings, I came across aWall Street Journal piece arguing for liberalizing the RMD rules. Accountant Ed Slottsays that the “government should raise the age for required minimum distributions to at least 80—if not eliminate it altogether.”Here are Slott ’s points:People are living longer today than before, so the RMD rules should be updated “to more accurately reflect today’s increased longevity.”Many people want to keep working, but “RMDs are particularly onerous for seniors who still have employment income and don’t need to tap savings for living expenses … No one should be forced to pull money out of an IRA while they are still working. When combined with a paycheck, these distributions can substantially increase taxabl e income … resulting in a higher overall tax bill that prematurely eats away at retirement balances.” The government should not discourage seniors from working, and the RMD rules can do that.Policymakers who resist tax cuts would likely oppose RMD repeal. But Slott argues, “Uncle Sam won’t be denied his cut, even if the funds are neve...

Source: Cato-at-liberty - October 17, 2017 Category: American Health Authors: Chris Edwards Source Type: blogs