Lower Taxes on Required Minimum Distributions
The buoyant stock market has swelled the amount of money Americans have in their retirement savings plans, which is undoubtedly a welcome development for seniors who will need that money to live on. But most of the more than $13 trillion in savings is stockpiled in tax-deferred plans, which means retirees will eventually have to pay taxes on it. And depending on the size of the account, that tax bill could be significant.
To prevent retirees from avoiding taxes forever, the IRS requires owners of traditional IRAs and other tax-deferred accounts, such as 401(k) plans, to take minimum withdrawals based on their life expectancy and the balance of their accounts at year-end. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was signed into law in December 2019, increased the age at which you must begin withdrawing money from 70½ to 72. Legislation pending in Congress would gradually increase the age for required minimum distributions to 75 by 2032.
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