Tuesday, August 30, 2016

IRS Now Allows IRA Distribution Deferrals

Today’s Elder Care Matters Q&A is about the IRS’s recent decision to permit Seniors to defer taking Minimum Required Distributions


Question: Has the Internal Revenue Service changed its policy about annual minimum required distributions from retirement accounts such as IRAs and 401Ks?


Answer: Required minimum distributions from retirement accounts such as IRAs and 401Ks have been problematic for many seniors who do not necessarily need to take money out of their accounts to meet their expenses. The rules have required seniors to withdraw minimum amounts from their retirement accounts beginning at age 70½ based on their life expectancies as determined each year by complicated IRS charts.


However, as Smoke Signals reports in “A new, liberating IRA option is available,” seniors now have the choice to take lower amounts out of their retirement accounts.


The new policy allows account holders to defer up to $125,000 or 25% of the total amount in their accounts, whichever is lower. The amount deferred does not factor into the required minimum distribution calculation.


The deferment can be taken until age 85, but the money must be placed in a qualified longevity annuity contract as the only premium payment of that annuity. The money placed into the annuity will continue to grow and payments will be made on the annuity when the deferment age is reached.


For seniors who do not need to take money out of their retirement accounts, this new option allows them to continue to increase their income if they wish to preserve those accounts as part of their estates or if they anticipate living longer and might need the money later.


Today’s Answer was provided by Scott A. Makuakane, Esq., CFP, Founder of  Est8Planning Counsel LLLC in Honolulu, Hawaii.  Attorney Makuakane is a Partner Member in the National ElderCare Matters Alliance.


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IRS Now Allows IRA Distribution Deferrals

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