When clients work past 70, RMDs are still required — and begrudged

Advisers claim current rules requiring those 70½ to start withdrawing funds from retirement accounts are outdated

Mar 8, 2019 @ 2:05 pm

By Mark Schoeff Jr.

When Ron Strobel was an investment adviser in Seattle, many of his clients were Boeing engineers. They loved their jobs and wanted to keep working as long as they could.

But when they reached age 70½, they had to take required minimum distributions from their individual retirement accounts. They didn't like it.

"RMDs are the No. 1 complaint I hear" from people of retirement age, said Mr. Strobel, founder of Retire Sensibly. "I am seeing more and more clients work into their 70s either because they have to or because they just like working. It's ridiculous that the IRS forces them to begin withdrawing from their IRAs when they don't want to or don't need to."

For John Cataldo, chief legal counsel at Integrated Financial Partners, the situation hits close to home. His 77-year-old father is still working — as are many of the firm's older customers.

"It is something we're seeing in different segments of our client base," Mr. Cataldo said.

This week the Insured Retirement Institute released its federal retirement security blueprint, and one of the items calls for updating RMD rules to reflect longer lifespans.

In an executive order released last August, President Donald J. Trump told the Treasury Department to examine RMD life expectancy and distribution tables and determine whether they should be updated based on current mortality data.

The executive order set a 180-day deadline. It's not clear whether the agency has completed the study. A Treasury spokesperson was not immediately available for comment.

A recently introduced bill, the Family Savings Act, would not require RMDs for retirement accounts that don't exceed $50,000.

Late last year, Sens. Rob Portman, R-Ohio, and Ben Cardin, D-Md., introduced a bill, the Retirement Security and Savings Act, that would have increased the RMD age from 70.5 to 72 in 2023 and to 75 in 2030. The senators said the original RMD age was set in the 1960s and has not been changed.

The measure died in the previous Congress. It would have to be reintroduced, which the senators have not yet done.

One of the challenges of changing RMD policy is that contributions to IRAs are tax-deferred. The distributions are taxed as ordinary income. If the RMD age is pushed back, the government would have to wait even longer for their tax revenue.

"It will have to get paid for," Paul Richman, IRI chief government and political affairs officer, said during the rollout of the group's policy agenda. "We'll see how Congress decides to do that."

Mr. Strobel acknowledged the dilemma.

"There's a conflict that exists there, and I don't think siding with the government is the best thing to do," he said. "The government gets their money eventually."

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