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Thursday, March 2, 2023

Required Minimum Distribution

IRAs have something called a Required Minimum Distribution.   Starting at 72, you are required to take a substantial fraction of your IRA each year.

Now I know that one of the goals is to make sure you do not leave too much wealth to your kids.  The left does not like having to compete for condos at Aspen or Jackson Hole or Ferraris.  Does anyone know what the stated goal was? More tax revenue from the distributions?

3 comments:

  1. The goal is always to get more of your money. I suspect the RMD requirement was a compromise to get the IRAs implemented in the first place.

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  2. RMDs start at 73 now, for those born in 1951 or later. Initially introduced as part of the Tax Reform Act of 1986, the purpose of RMDs is to ensure that retirees do not use tax-advantaged retirement accounts as permanent tax shelters.

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  3. I have not found any history that explains why IRAs have RMDs. My take is that money parked in IRAs sits tax free (and can be inherited). Govt needed to sunset IRAs so the money could not sit there (and possibly grow) forever.

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