Friday, August 31, 2018

Making retirement great again

I have a relative who made an incredibly small amount of money in her decades of working, yet she has a very nice home in a good neighborhood and lives quite well.

She also has a 401-k that she wishes to bequeath to her progeny along with the house. When she turned 70 1/2, she lamented that the government made her withdraw some money from her retirement plan when she really did not need the money.

President Trump will end that.

Fox News reported, "President Trump is expected to sign an executive order on Friday that could affect how you save for retirement.

"The White House said the measure – which directs the Treasury and Labor Department to consider issuing regulations or guidelines – will look at updating the rules on required minimum distributions for retirement plans, in an effort to allow retirees to stash away more money in their accounts for a longer period of time.

"Under current law, retirees are required to begin withdrawing funds from their retirement accounts when they turn 70.5.

"Trump is also asking the administration to look into ways to make work-based retirement programs more affordable for small businesses, in order to increase the number of those businesses that offer options."

This is welcome news. People who scrimped and saved and invested wisely should not be penalized for acting responsibly. If the government cannot stop a young woman from aborting her baby, why is it telling people in the 70s how to spend their money?

President Trump has made retirement great again.

The news from the Financial Markets is even better than anticipated. For all of you that have made a fortune in the markets, or seen your 401k’s rise beyond your wildest expectations, more good news is coming!

I am all-in on an S and P 500 stock index fund even in retirement. Dance with the one who brung you. While I am far from being the millionaire, many others are.

Fox News reported, "A significant number of people are seeing a meaningful increase in the sizes of their retirement accounts. According to Fidelity, the number of '401(k) millionaires Opens a New Window' or people with at least $1 million in their 401(k) accounts, rose to 168,000 at the end of June, up more than 40 percent over the year prior. The number of IRA millionaires hit 156,000 during the same period."

Thus you have 314,000 individuals who scrimped and saved and invested in the American economy, and the government wants to make them spend their money?

24 comments:

  1. Say bye-byes to FL, Demos.

    Is this guy good or what?

    ReplyDelete
    Replies
    1. I wonder if humorless troll plans to live on insects in the desert or does he have money in the market so he can buy some bread and wine someday? Will he thank Surber's Furher for nutrition he bought himself or Lil'Evita and the Sandernistas for the communal dumpster he is diving in? I wonder. But I don'care, not at all.

      Delete
    2. Dude, his plan - their plan - is to take the money we savers have built and then give us a Retirement Living Wage of around $30k a year. Then they’ll distribute the rest to the people who didn’t save. Classic Communism.

      Delete
  2. If you have a large 401 K and are retired transfer it to an IRA. Then if you have low income and don't pay tax you can gradually convert your IRA to a Roth IRA without paying taxes. The key is not to convert so much at one time that it pushes you into a taxable bracket. A Roth IRA doesn't have a mandatory distribution requirement.

    ReplyDelete
    Replies
    1. It shouldn't be necessary to game the system like that. Good grief, what does any of that have to do with, you know, freedom? The government needs to butt out of people's financial lives.

      Delete
  3. Let's hope more Dems can take advantage of the new retirement rules after November.

    ReplyDelete
  4. This is wise policy on a number of fronts, but the biggest beneficiaries won't necessarily be us right wingers, but some lefty states. Think about why you aren't hearing as much lately about the pension apocalypse. The reason is because of the markets improving under Trump. And allowing folks who don't need to take money out of their IRA's to leave it there will cause more of the same. Thus states like California and Illinois are getting a temporary reprieve. And of course, the economic Cassandras that make a living off of being Chicken Little, nor the MSM are going to say so. Thus you have a news item being quietly and persistently smothered, ala Iowahawk, until it stops moving.

    ReplyDelete
  5. Not to mention that after 8 years of the Fed desperately trying to help Obama and the Democrats by reducing the interest rates to ZERO and printing money like crazy, all of which was great for the banks and screwed all savers, now that we have a Republican President - and it's the hated Trump! - they're finally letting interest rates rise back (to normal) to kill the economy. And, ha! Because the hated Trump! knows what he's about, the economy is rising anyway! Two-fer!

    ReplyDelete
  6. Sorry, Don, but on this issue I strongly disagree. As someone who's had 401-Ks, Traditional IRAs, and Roth IRAs, the current mandate to start withdrawals is, I think, both reasonable and appropriate.

    First, the amount that has to be withdrawn each year and is thus subject to tax is roughly 4%, which is not very much by any standard.

    Second, over the years the 401-K or IRA has allowed people to defer income tax on their earnings at a time when their earnings and tax rates are normally at their highest. This is a benefit that is intended to promote individual saving for retirement, not to create an estate to pass along to one's heirs. Once someone is in retirement, it is time to pay the piper, or the taxman. That is fair; it is reasonable, especially since the required annual withdrawal is 4-5%. If someone has enough money in retirement to pass along to their heirs, they have enough money to pay the taxes their 401-K or IRA allowed them to defer over the years.

    Third, the proposed change in the rules will likely benefit 401-K and IRA paper millionaires (like me) more than your relative, I suspect. Even so, or perhaps especially so, I think the current rules should remain in place so people do not use these savings plans to hide income in a way that I find no different from the strategies that companies like Apple used to hide their corporate income overseas in order to avoid US taxes.

    ReplyDelete
    Replies
    1. But why be forced to pull out funds and pay ANY tax if you don’t need the money?

      It is all about the taxes.

      I now have to take money out that I don’t need and then reinvest it n another investment account. I will pay taxes on the withdrawn money (income) and future taxes on capital gains, interest and dividend income from the reinvested money. If you can avoid taxes, your money grows faster.

      Delete
    2. I do mind paying a tax to the government. What I do mind is that our government has stated that for us to earn $$, we have to pay a tax in which the
      the more you earn, the more we pay percentage wise.

      That's not fair.

      Delete
    3. @S.Lardmaster: If the money you withdraw from your 401-K or Traditional IRA is transferred to a Roth IRA, your investments in the Roth can grow tax free. After 5 years you can withdraw both principal and earnings from the Roth tax free. Once you have paid the tax on the RMD, you never have to pay income taxes on your Roth investments.

      Delete
    4. Sir,I have one thing to say to your essay BS.And Apple still does.
      "Third, the proposed change in the rules will likely benefit 401-K and IRA paper millionaires (like me) more than your relative, I suspect. Even so, or perhaps especially so, I think the current rules should remain in place so people do not use these savings plans to hide income in a way that I find no different from the strategies that companies like Apple used to hide their corporate income overseas in order to avoid US taxes."

      Delete
    5. My suggestion allows you to make tax deferred money non taxable.

      Delete
  7. Got 14+ years to go before the well is dry. Just retired. made about 10% this last year.

    ReplyDelete
  8. and my taxes will be cheap

    Rootook Bob

    ReplyDelete
  9. Speaking of retirement plans, I hope President Trump tackles Social Security reform after he's re-elected in 2020.

    Here's an idea.

    The last time Social Security was meaningfully reformed was in 1983. In August of that year the DJIA was about 1200. Today it is 25,962.82. I'm over 70 years old and my monthly social security check is about $2,000. Can you imagine what my monthly income would be if the government had given me back just half of my withholding since 1983 and allowed me to invest it in the stock market?

    ReplyDelete
    Replies
    1. Here is idea,put all SS funds they stole over the years and put it back it in SS Trust Fund.Than stop taxing me on my SS income if I chose to work after I retire,they get their cut from my earnings.

      Delete
  10. The IRS minimum distribution rules are needlessly complex, and maybe this EO will get them revised. But the requirement itself is written into Section 401(a)(9) of the Internal Revenue Code. The administration can't change this, it will require Congress to amend the law itself. Obama was happy to ignore the rule of law but DJT seems to follow the law, even when it frustrates him.

    ReplyDelete
    Replies
    1. Fidelity and TdAmeritrade have a calculator that makes it easy to calculate your IRA MRDs.

      Delete
  11. I don’t plan ever to completely retire. The thought makes me nervous.

    If I ever stop driving the truck, I’ll volunteer to drive a bus for the country club or the old folks’ outings or something.

    Far as I’m concerned, I don’t plan to present Old Man Death with a stationary target.

    ReplyDelete
  12. This would save me money in less taxes paid because my IRA MRDs keep getting larger each year though it might be too late to save me any money, I'll be 74 years old in Dec.

    ReplyDelete
    Replies
    1. The rate at which the RMD grows with your age is very slow. The last time I looked, at age 74 it's 4.5% of the principal amount, At age 80, it's only slightly larger at 5.3%. If you have an IRA worth $100K, say, in your late 70s you would be required to withdraw and pay taxes on around 5% of that amount, or $5K. Most 70 y/o people who are in retirement have an effective federal income tax rate of just over 10% I would guess, so your federal tax might be 10% of $5K a year or $500. That's not a lot of money, far less than a lot of people spend on their annual cell phone bills.

      Delete
  13. do you realize WHY Congress/IRS rules make you take required minimum distributions from IRA/401K at 70 1/2? THEY DONT WANT YOU TO LEAVE ANYTHING TO YOUR KIDS. the idea is to keep the ruling class as the ruling class, do not allow normal working people to move up, enrich their kids. the min distribution table is based on actuary tables to make sure it is all gone when you die. Why dis the limit on IRA deferred tax contributions limited each year? same reason. Why is there an income limit on contributing to an IRA? same reason. BASTARDS.

    ReplyDelete