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Commentary

The IRS Takes a Big Step Toward a Small Reduction in RMDs

But these changes will only help so much.

Back in January, I wrote about legislative proposals to postpone required minimum distributions and an executive order President Donald Trump wrote directing the IRS to make technical changes in the RMD calculation that also was designed to reduce these required distributions. Although legislation to push back RMDs to later ages has made it out of the House of Representatives, it remains stalled in the Senate. Unlike Congress, the IRS has been working on the issue and took an important first step toward reducing RMDs for most retirees.

This will make a lot of people happy because no one really likes RMDs, and it's easy to understand why: Who wants to take money they do not need out of their 401(k) and IRA accounts? That's particularly true for retirees who are bumped into higher marginal tax rates because of these withdrawals, especially when these RMDs increase the percentage of Social Security benefits that are subject to taxation.

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