It’s my birthday today, so happy birthday to me. And thanks to those who have or will wish me well on the day. Now, in most ways this is not a big deal birthday – not a decade milestone or a year to be marked with precious metals or stones. But it is my RMD birthday and my life will never be quite the same.
As some of you know and understand better than I do, RMD stands for Required Minimum Distribution, and it has to do with how the IRS gets at that money you put in a tax-deferred retirement account over the years. Deferred no more. Starting with today’s birthday, I am required to withdraw a certain minimum amount from a little tax-deferred nest egg that’s been happily protected from the taxman all these years. The IRS says I will have to take out at least so much every year for as long as I live, and that the “so much” will be subject to income tax – the tax that was deferred back then. I can put the money in the bank, take a trip, buy a toy, or give it to my favorite mission cause. I have to take it. Absolutely fair even if a bit annoying.
So how much is “so much”? It has to do with how long the IRS thinks I am going to live. I know, it is a little more complicated than that when you factor in designated beneficiaries and so forth, but, yes, the IRS thinks it knows how long I am going to live. They publish a table with just such information. Turns out, they say I will live to be 90. And if I live to be 90, they’ll tax me as if I am going to live to be 96. The life-expectancy table runs to age 99 (when they’ll tax me as if I am going to live to be 101). One of their tables goes to age 120. The taxman cometh. Ben Franklin was right about death and taxes. Continue reading →