Trump to sign executive order to boost retirement savings

[Wingnut]

I never understood the logic of the mandatory withdraws

 By PATRICK TEMPLE-WEST

08/30/2018 09:29 PM EDT


President Donald Trump will sign an executive order on Friday aimed at boosting retirement savings, giving Americans more time to keep their money in tax-deferred accounts and allowing small businesses to band together to offer 401(k)s.

The order, to be issued by Trump during a visit to Charlotte, N.C., will call on the Treasury Department to review its rules for mandatory withdrawals from 401(k) plans and individual retirement accounts, administration officials told reporters on a Thursday evening call.

Generally, people must start withdrawing funds from these accounts when they turn 70-and-a-half. The Treasury rules have not been updated since 2002, said Daniel Kowalski, counselor to the Treasury secretary.

“The EO asks Treasury to consider whether they need to be updated,” he said.

 By PATRICK TEMPLE-WEST

08/30/2018 09:29 PM EDT
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President Donald Trump will sign an executive order on Friday aimed at boosting retirement savings, giving Americans more time to keep their money in tax-deferred accounts and allowing small businesses to band together to offer 401(k)s.

The order, to be issued by Trump during a visit to Charlotte, N.C., will call on the Treasury Department to review its rules for mandatory withdrawals from 401(k) plans and individual retirement accounts, administration officials told reporters on a Thursday evening call.

Generally, people must start withdrawing funds from these accounts when they turn 70-and-a-half. The Treasury rules have not been updated since 2002, said Daniel Kowalski, counselor to the Treasury secretary.

“The EO asks Treasury to consider whether they need to be updated,” he said.

[endicom]

https://www.politico.com/story/2018/08/30/trump-retirement-savings-executive-order-763351

[Applewood]

I would be happy if there was no requirement to  withdraw at 70-1/2 or at any age.  Doesn't look like Trump is ordering a change -- just telling the Treasury to review the requirement to see if it needs to be updated. 

And how about not taxing withdrawls at all?  Haven't we paid enough in taxes just earning the money to put in our IRAs? Why is our money taxed more than once?

[truth_seeker]

I would be happy if there was no requirement to  withdraw at 70-1/2 or at any age.  Doesn't look like Trump is ordering a change -- just telling the Treasury to review the requirement to see if it needs to be updated. 

And how about not taxing withdrawls at all?  Haven't we paid enough in taxes just earning the money to put in our IRAs? Why is our money taxed more than once?

Except that is wrong. Instead the tax upon withdrawal would be the first time; the tax from the time of earning, having been deferred.

[cato potatoe]

Eliminating the mandatory withdrawals from tax-deferred accounts makes perfect sense.  It also creates a temporary hole in the government's budget.  And that's fine, but they need to figure out what spending to cut instead of hastening the debt crisis.

[GrouchoTex]

There is also a minimum age requirement, for tax differed  401k's, correct?
Isn't that age 59-1/2, and there is a 10% penalty on top of the Capital gains hit?

[truth_seeker]

There is also a minimum age requirement, for tax differed  401k's, correct?
Isn't that age 59-1/2, and there is a 10% penalty on top of the Capital gains hit?

I think tax deferral on c0ontrributions is allowed until age 59.5

Separately I think a 10% tax penalty applies to early withdrawals.


Withdrawals are regular income, so capital gains is not an issue.


Check online,, or with a real tax expert.

[Applewood]

Except that is wrong. Instead the tax upon withdrawal would be the first time; the tax from the time of earning, having been deferred.

Ok.  But I was talking about when I worked like a dog to earn the money to invest.  That money was taxed. 

I guess I'm tired of DC, Harrisburg and every other government entity stealing the money I worked hard for -- to line their pockets and giving it away to their "poor" constituents for votes.

[LadyLiberty]

59 1/2 is the age you can start to withdraw without paying the 10% penalty.l

70 1/2 is when you are forced to make a minimum yearly distribution.

[Hoodat]

Now if we could only invest 12.5% of our income into 401(k)s and IRAs instead of having Social Security confiscate it at the point of a gun, we could all retire as millionaires.

[libertybele]

I would be happy if there was no requirement to  withdraw at 70-1/2 or at any age.  Doesn't look like Trump is ordering a change -- just telling the Treasury to review the requirement to see if it needs to be updated. 

And how about not taxing withdrawls at all?  Haven't we paid enough in taxes just earning the money to put in our IRAs? Why is our money taxed more than once?

I second that emotion!

[GrouchoTex]

I would be happy if there was no requirement to  withdraw at 70-1/2 or at any age.  Doesn't look like Trump is ordering a change -- just telling the Treasury to review the requirement to see if it needs to be updated. 

And how about not taxing withdrawls at all?  Haven't we paid enough in taxes just earning the money to put in our IRAs? Why is our money taxed more than once?

My contributions to my 401K are pre-tax, so no tax is paid until I withdraw any of it.

[goodwithagun]

Ok.  But I was talking about when I worked like a dog to earn the money to invest.  That money was taxed. 

I guess I'm tired of DC, Harrisburg and every other government entity stealing the money I worked hard for -- to line their pockets and giving it away to their "poor" constituents for votes.

If you invested in a post tax account (like a Roth IRA) then you won’t be taxed. If you had a pre tax account (like a 401k) then you never paid taxes on that money.

[Elderberry]

If you invested in a post tax account (like a Roth IRA) then you won’t be taxed. If you had a pre tax account (like a 401k) then you never paid taxes on that money.

When you invest post tax or Roth into your 401K, when you withdraw, you are taxed on the earnings portion. Last year my 401K offered a feature where you could move "post tax" moneys into your Roth fund. I selected to move $40K. Of that 40K, only 16K of it was original investment and I had to pay taxes on the remainder last year.

[Jazzhead]

Except that is wrong. Instead the tax upon withdrawal would be the first time; the tax from the time of earning, having been deferred.

Correct.  Pre-tax contributions to 401k plans have never been taxed,  nor have employer matching contributions and the investment earnings on both, prior to distribution.   Meanwhile, employers can take an immediate deduction on these contributions.   This disconnect between the timing of the employer's deduction and the employee's income inclusion - typically decades -  represents the biggest single tax loophole in the Internal Revenue Code.

The purpose of the age 70 1/2 rule, therefore,  is to place a cap on the loophole.   At some point, a taxpayer must be forced to include in income amounts that his employer was able to deduct years before.

Eliminating the age 70 1/2 rule would blow an enormous hole in the federal deficit.  Unless spending is cut, it would be the height of irresponsibilty.

[Jazzhead]

I second that emotion!

So you prefer eliminating pre-tax contributions altogether,  and taxing investment earnings on retirement savings as it builds up?  That would allow all withdrawals to be tax-free.   That is a perfectly viable alternative, and would go a long toward trimming the federal budget deficit.

[Wingnut]

I never understood the logic of the mandatory withdraws

 

Correct. 

The purpose of the age 70 1/2 rule, therefore,  is to place a cap on the loophole.   At some point, a taxpayer must be forced to include in income amounts that his employer was able to deduct years before.

Eliminating the age 70 1/2 rule would blow an enormous hole in the federal deficit.  Unless spending is cut, it would be the height of irresponsibilty.

Thank you for answering my question.