JUST PLAIN TALK: Retirement planning Ch Ch Ch Changes

Buz Livingston
Buz Livingston

In most cases, owners of 401K plans and IRAs must take required distributions at age 70 ½. Withdrawals are based on life expectancy and change annually as clients age. Life-expectancy tables used to calculate withdrawals rely on 2002 data. To allow for increased longevity, the Treasury Department has proposed revising the schedules and is currently taking public comments. If the modifications pass, retirees can take less from retirement savings. Reduced withdrawals could provide savers additional funds for long term care expenses, which often hobble retirees. Heirs would be in line for increased inheritances, too.

For the vast majority of Americans, the change is unnecessary. For 80% of retirees, their withdrawals exceed the required amount. While longevity is higher today than two decades ago, overall, life expectancy has declined, albeit slightly, over the last few years. Supposedly fairness is the motivation for the update, but the tables are gender-neutral and still force women to take distributions skewed from their life expectancy. With soaring federal deficits, the change reduces tax revenue, too. So much for fiscal conservatism. Most of my clients who only take minimum distributions have pensions as well. With pensions an endangered species, this change will eventually only help wealthy people.

Another retirement planning game-changer is the Secure Act, currently stalled in the Senate. Recently Senate Majority leader McConnell complained about the House of Representatives not sending legislation to the Senate. However, scores of bills have passed the House some likely were dead on arrival, but the system was designed for legislators to debate bills and work on a compromise. The Secure Act would likely pass, but McConnell chooses to pass legislation by unanimous consent.

The Secure Act increases the mandatory distribution age to 72 from 70 ½. To offset the decrease in revenue, the ability for non-spouse beneficiaries of IRAs and 401K plans to “stretch” distributions over their life expectancy would vanish. Instead, non-spousal beneficiaries would have to spend down, in most cases, the inherited IRA or 401K over ten years. Increased distributions during working years could push recipients into higher tax brackets. Also, the Secure Act would allow annuities as a 401K option likely a bad idea. Bottom line: I’m opposed to the Secure Act, but there is a renewed push for it to get through the Senate. Also, I’m looking forward to beginning distributions; otherwise, my wife won’t let me spend the money.


In an earlier column, I made a mistake regarding Merle Haggard’s death. Haggard never indeed retired, and my point was to show how staying engaged during your life can increase the quality of your life. I regret the oversight and meant no disrespect. To me, he was one of the heroes of this country.

You can’t always get what you want, but Buz Livingston, CFP, can help you get what you need. For specific recommendations visit us online at livingstonfinancial.net or come by our office in Redfish Village, 2050 Scenic 30A, M-1 Suite 230.