Is the Extended RMD Age an Opportunity Or Tax Trap? | Secure Act 2.0

Timestamps:
0:00 New RMD Rules
0:27 When Do You Need To Take RMDs?
2:12 Larger RMDs with this Change?
3:32 3 Case Studies Based on This RMD Adjustment
6:37 Potential Trap #1 - Inheritance Trap
7:42 Potential Trap #2 - Widow Trap
8:37 The Opportunity?

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Always remember, "You Don't Need More Money; You Need a Better Plan"

[krishnadevulapalli]

I was oblivious to Roth conversions until 2 years ago. Now at 71, I gained an additional year for Roth conversions which is great. I have been employing charitable contributions with Roth conversions with an exemplary 20% effective tax rate. Having retired last year is for sure helping the cause.

[kevinmccumber]

Eric, thank you for tackling another interesting retirement topic. I realize you sometimes simplify an issue in order to avoid becoming tangled in the weeds, but I suggest simplification can sometimes mislead the audience. I suggest Roth conversion strategies that maximize the 12%; 22%; or 24% bracket may be great for younger people, but for those people subject to IRMAA, maximizing the 12% bracket; followed by just shy of the 1st IRMAA threshold; followed by just shy of the 2nd IRMAA threshold; etc.; etc. are better strategies than 12%/22%/24% bracket maximization.

[TravelingTheWorld]

I am extremely grateful that I have been able to max out my Roth 401K the last two years. My effective tax rate for the last two years has been 19.6% for the state and federal combined.

[captsorghum]

Seems like most of your conversions should be done by age 70 at the latest anyway, because of Social Security. But the change does allow for another year or two of smaller conversions in lieu of RMDs.

[davidfolts]

Listen to the words of wisdom from Eric, the Money Math Maven, one sharp gentleman he is...

[TheFirstRealChewy]

If we end up having an issue due to RMDs then it means we are doing quite well financially. A blessing and a curse. That said, if we unfortunately end up in this fortunate position, we'd just continue doing conversions and pay the taxes.

[mainerin_texas-gordon-]

Excellent video. If you care about widow/widowers tax trap and/or giving to your heirs, RMDs are bad news. At age 60, take a minimal paying job and convert as much as you can for the next 10 years, not exceeding IRMAA limits. You will be in much better shape to give to your heirs. I have been doing this for 3 years now and it is working great. I expect no RMDs at age 70.

[jonmeilstrup]

I'm a little confused as to how having RMDs starting later is worse for your financial plan. If this is the case, couldn't you just act like the RMD age was still at 72, and take larger distributions from IRAs/401ks at that point? If you don't need the funds at that point, you could do a Roth conversion with the money. Either way, you have an option of paying the tax early (between 72 and 75), or delaying it by not taking a withdrawal, if that helps your plan more.

I do understand that many people won't do conversions during this time, and will just take whatever the RMDs are. In that case, there could be some downsides to waiting, especially for those who want to gift to heirs, or who have one spouse greatly outlive the other.

[thomaslyens]

If you’re going to have “too much money” at age 75, I would recommend spending more money until then. 🎉

[jpturner]

Another great and informative video. Thank you for all the work you and your team did to put this together and present it! 👍🏽

Semper Fi

[jaynelson]

I get it, gotta have a tax plan. But the same guy that tells you to spend $250k converting to Roth, goes off the rails if you tell him you're going to use the same $250k to buy a motorhome.

[pcash]

Nice presentation. Was wondering if your conversion model also factors in asset location. That is, I have higher growth investments in my Roth and slower growth investments in my rollover IRA that I’ve been converting closer to max of 24% bracket. And it seems better than the 22% max method. But your second example confused me. What was the main reason the two approaches flipped giving the 22% the leg up. Wouldn’t it be better to get assets into the higher growth Roth sooner to allow more time to grow? Thank you

[tomm.]

It's getting so complex I'm just going to give all my money away! /sarc

[tompGA]

There is so much talk about a tax strategy to do Roth conversions in the 22% tax bracket and the tax savings by end of life, which always seems to be 90+. What is not ever discussed or shown, is the break even point in age for those tax savings. Where is the scale of taxes paid at 70, 75, 80, 85, and 90. Most of us have a 5% chance of making it to 90, seems silly to always look at the total tax savings at that age only.

[edwardbrito]

Inflation is 6%? Waiting for it to disappear

[adiposerex]

I learned about RMD when the age I could withdraw some, the finish line moved forward. Several times. Now I have to wait 2 more years. I can’t get at my own cash.