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David Bach has an interesting whitepaper that proposes the government offer a program where withdrawals from retirement accounts are taxed at 12% from ages 60 to 68. The thesis is that 83% of the boomer generation do not tap into their IRA until RMDs forces them to.
What do you think?
I would think that would be an immense incentive for many people to do one big Roth conversion. That’s what I would do
So the logic here is, we incentivized people to fund their retirement accounts too highly… and now we need to give them another round of tax incentives to take their money out again? Seems like maybe another round of tax breaks is not the right solution.
Perhaps the age for RMDs should have remained 70,5.
Few thoughts. Would people actually spend the money, rather than just dumping distributions into brokerage accounts or doing huge Roth conversions?
If I were in that age range, it wouldn’t help because I am already living in the 12% marginal world. Perhaps they could give me a flat 6% rate, but I’d probably just stick it in my brokerage, or maybe do Roth conversions.
I’ve watched two long form interviews with him about this. Very intriguing. He says if it passed he’d withdraw his entire IRA immediately (because he doesn’t trust the government not to change its mind). Not a bad idea. Difficult to imagine you or your heirs beating a 12% rate.