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President Biden Signed a New Withdrawal Rule: Beneficial for Wealthy American Seniors

A few changes to required withdrawals from retirement accounts are included in new retirement rules in legislation signed by President Biden in December, and these changes are well-liked by wealthy seniors.

The new law has raised the age from 72 to 73 this year at which you must start taking required minimum dividend payments, or RMDs, from individual retirement plans (IRAs), 401(k)s, and 403(b) plans. The minimum age will rise to 75 in 2033.

RMDs for Roth accounts in employer 401(k) plans are also abolished beginning in 2024, according to another provision.

Your required annual withdrawal is based on an IRS calculation based on the value of your account and your expected life expectancy.

Being required to withdraw money from tax-sheltered accounts like IRAs and 401(k) plans each year, beginning at a government-mandated age, isn’t financially advantageous for people who aren’t depending on it to pay for living expenses.

The chance to continue building up tax-deferred savings for these retirees, who have sufficient other income sources to support their lifestyle, can be a crucial element in their long-term financial security and even that of their heirs, base on the article published by Yahoo Finance on January 22, 2023.

According to the results of the most recent Transamerica Retirement Survey of Workers, a concerning percentage of employees withdraw from their retirement accounts before they retire. In their 401(k) or similar plan or IRA, more than one in three workers (37%) have taken a loan, an early withdrawal, or a hardship withdrawal, which can have expensive repercussions. Of those who are already taking their RMDs, only a small percentage withdraw the minimum.

Because it’s only intended to make rich people richer, I think this provision is terrible, Alicia Munnell said. Who has the time to wait? Just those with a lot of money.

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