Freeing some seniors from required IRA distributions is worth the cost: J. Mark Iwry

A proposal to exempt half of the seniors in the nation from required minimum distributions out of IRAs is well worth the cost, according to Treasury official J. Mark Iwry. A provision in President Barack Obama's budget proposal would permit individuals with less than $75,000 in their retirement accounts to avoid required minimum distributions from their individual retirement accounts at age 70.5. A similar proposal by Rep. Richard Neal, D-Mass., would apply the exemption to those with less than $100,000 in their retirement accounts. Speaking at the Insured Retirement Institute's Government, Legal and Regulatory Conference in Washington on Tuesday, Mr. Iwry noted that elderly investors with the smallest accounts aren't using their tax-advantaged IRAs as a way to pass wealth on to others. Rather, they genuinely need the money to live on during retirement. “People who don't have that [$75,000] in aggregate need the money for retirement,” Mr. Iwry said. “We'd like to focus on not having RMD rules place a compliance burden on people who don't really need to be subject to them.” He noted that the cost of putting through that provision would be about $35 million per year. “That's a reasonable cost to exempt half of these seniors from a 50% excise tax for noncompliance with the RMD rules,” Mr. Iwry said.