Congress looking to change or even abolish this key 401(k) provision

[question everything]

Congress looking to change or even abolish this key 401(k) provision

The SECURE Act, which was signed into law last December, included a provision that pushed up the age for mandatory retirement plan distributions from 70 to 72. Now, lawmakers are hoping to pass another retirement bill that’s being informally called SECURE Act 2.0 by early next year. A provision in the bill would push distributions up even further, to age 75.

And don’t look for Congress to stop there. “My goal is to get rid of it completely,” House Ways and Means Ranking Member Kevin Brady (R., Texas) said of the age restriction during an appearance at the Bipartisan Policy Center Solutions Summit simulcast on Yahoo Finance. He said the pending legislation, which he helped author, takes “another step forward in increasing that age to 75 and exempting those more modest accounts of $100,000 or less.”

Brady’s partner on the bill, the Democratic House Ways and Means Chairman Richard Neal (D., Mass.), has also voiced support for the provision. He noted in a recent Yahoo Finance Present interview that “people are living longer, they're going to work longer.”

The argument for an age restriction – which is noted in an official summary of the bill – is “to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.”

The bill, as currently written, would change the rule for any required distributions in 2021 and beyond. The legislation would also exempt retirees from minimum distributions for the rest of their life if they have less than $100,000 in all of their retirement plans at age 75. (As it stands now, when you reach age 72, you're required to withdraw a certain amount of money from your retirement accounts each year and pay taxes on that amount.)

https://www.yahoo.com/finance/news/kevin-brady-retirement-bill-required-minimum-distributions-171438132.html

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Okayy... but has he calculated how much tax the treasury would lose? Hey we are already at a deep deficit what would additional millions matter?

Or does he want to eliminate the tax free contribution to begin with?

[Wellstone ruled]

1. As a Broker

acquaintance said alarmingly,Wall Street is scared to death of what is happening as a Result of Covid and now the mega unemployment numbers. People are pulling their Savings and Selling out their 401's as well as their IRA's,paying the penalties because they are in urgent need to save themselves from being on the Streets.

This Legislation is all about you and I not taking our money out of the Markets . All those market based so called savings plans total in the Trillions.

[progree]

2. When I take an RMD, I just transfer it to another "market based so called savings plan"

though I consider both of them to be quite real. (Yes, and I have to pay taxes on the RMD withdrawal/transfer). I never consider taking an RMD to be some kind of mandate to go spend it.

This Legislation is all about you and I not taking our money out of the Markets . All those market based so called savings plans total in the Trillions.

from the OP:

The argument for an age restriction – which is noted in an official summary of the bill – is “to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.”

Nope, it doesn't ensure that I spend it in my lifetime. I wonder what complete and total idiot wrote that into the bill. A requirement to take RMDs does not impact my spending in the least, at least not in the short-term (though my net worth is reduced by paying the taxes on the RMD withdrawal, so ultimately it could actually reduce my spending over time).

[Wellstone ruled]

3. First of the RMD

is not required this year,which in many cases is a major plus. We usually spent our RMD's on our Kids or put into our Savings. You end up paying Taxes on it anyway.

Believe Richy Neal and a Senator Came up with that Horsesh*t idea,at least that is what the Broker came up with.

It is all about the shirking numbers of people doing Market Investing. We are presently watching our Children Struggle with issues related to having to strip their 401's because of Covid as well as Furloughs with zero unemployment bennies. The worst is,loss of Medical Insurance and not being able to gain insurance via ACA this late in the year.

[progree]

4. I think its all about increasing the money doing "Market Investing"

by not taking RMDs, one just keeps that much more money in their 401ks and IRAs. And not paying taxes means more money to keep saved/invested. I think we agree on that?

I'm not sure what the difference is between "Market Investing" and "savings".

My 401k had money market options, as well as fixed income (e.g. bond funds and CD) options, so one didn't have to invest in the stock market. And all the IRAs that I've had could be invested in simple savings account, or CDs, or just about any other so-called "safe" thing.

And I think a far bigger "con job" than stock market investing{1} is getting people to accept a return of a fraction of a percent on "savings", or 1.5% on CD's. The big banks are as much a part of Wall Street as Wall Street. (And the little banks and credit unions are just following along).

{1} ON EDIT - Before AHIA reads this, I want to make clear that I don't think of stock market investing as a "con job", but I realize that some of our more "progressive" members think it's the "Wall Street Casino" where the big boys rake off trillions in fees and all that baloney

[Wellstone ruled]

5. Do recall what

Senator Roth wrote shortly after he was able to ram rod the 401 case through the Senate,back in the day,in order to provide a Tax exemption tool for the Exec's at DuPont and IBM and Dow Chemical. Roth said something to the likes of,we will allow companies to offer this as a alternative to a Defined Pension in a effort to hold down the Influence of Organized labor.

[progree]

6. I didn't realize that companies were required to offer a defined benefit plan

had not heard that one before.

I do realize that yes, companies started offering 401k's as a "big benefit", and then started chipping away at their pensions and getting rid of them for new employees, but that had more to do with growing foreign competition and the weakening of the power of unions than the existence of the 401k.

ON EDIT: Though the companies did make it sound like a 401k was as good as, or even better than a pension because of flexibility, portability, you didn't have to work for the same company for 20 years in order to get more than a tiny pension, blah blah, and you could become a millionaire if you invested well (instead of stuck with a boring formula-determined pension) and all that. So yes, in that way, it was part of a clever marketing job.

[Wellstone ruled]

7. Like most so called plans

to benefit the unsuspecting,you make that turd fly with one hell of a Marketing Plan.

Proud to say,we benefit from a Defined Pension,all be it small because of Corporate Bankruptcy laws during the Reagan Nightmare. But,was able to save full Pensions for our most Senior Members in our labor group.

[PoindexterOglethorpe]

8. Companies were never required to offer a defined benefit plan.

And lots of companies never did. And there was, as you've noted, no portability, and sometimes you had to work 25 years or more to finally get the pension. Often you had to be a minimum age, like 25, to even get enrolled.

The truth about pension plans is that even at their peak, fewer than half of all workers were covered. Or ever collected a pension. And in recent years any number of companies have simply walked away from their pension plans, leaving retired workers with no or greatly reduced pensions. I'm one of those.

Too many people just blew off the 401k, didn't put much money in, or put it all in very low-yielding funds.