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Retirement Planning > Spending in Retirement > Required Minimum Distributions

Sen. Cardin Signals More RMD Relief in Next Stimulus

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Sen. Ben Cardin, D-Md., signaled Thursday that the next round of coronavirus stimulus could likely include required minimum distribution relief.

During an early Thursday afternoon webcast held by the American Council for Capital Formation, Cardin was questioned on measures lawmakers could take to deal with the massive withdrawals from retirement accounts taking place now.

“In response to the coronavirus, there were provisions put into the CARES Act that deals with pension issues,” Cardin responded. “We are suggesting that perhaps we should be doing more, and that is, ease up on the required minimum distributions … people can keep more money in their retirement,” Cardin said. “That should be something we may be able to get done in a stimulus bill in the next couple weeks; it’s something we should take a look at.”

While Cardin did not elaborate on the types of RMD relief that could be considered, IRA expert Ed Slott told ThinkAdvisor on Thursday that he hoped Cardin means eliminating RMDs altogether, which Slott has been urging for years.

“There is no reason for them anymore, other than to annoy seniors,” Slott said.

According to the Treasury Department’s own numbers, “80% of people subject to RMDs take that amount or more because they need the money,” Slott said. “Only 20% take the minimum. Eliminating lifetime RMDs also makes sense since the Secure Act did away with the stretch IRA (beginning in 2020) for most non-spouse beneficiaries anyway, forcing the funds out in 10 years after death. This provides an end date to most IRAs so there is no need to force money out before then. Now that we have this deadline on when the taxes will be eventually be paid, the RMD burden should be removed.”

The government, Slott continued, “should want lifetime RMDs eliminated if only to bring in more revenue. The longer a person delays taking distributions, the more that builds up in that tax-deferred account, adding to the amount that will be taxed in the future.”

The government, Slott added, “is a partner on these gains, and if tax rates increase (which is likely, given our deficits) then Uncle Sam reaps even more of this appreciation. An IRA is actually a receivable building for the tax man. The problem is that no one in Congress thinks long term. If they did, they would never have allowed the Roth IRA to be born.”

During his webcast remarks, Cardin conceded that tax increases would have to be considered in light of the deficit caused by the coronavirus stimulus.

“When we get through the coronavirus a number of things are clear, we’re going to get our economy back on track; we need to get our economy back on track,” Cardin said. “It’s the most important thing we could do for our gross domestic product and for our standard of living. But we’re going to end up with a large deficit and the question is going to be: How are we going to pay for that? How are we going to tax in order to make sure we have the revenues to be responsible? To be able to perform essential services but also to reduce the amount of debt we have in the country? Certainly economic growth will help us, but we’re going to need revenues.”

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