Legislation would raise the age at which beneficiaries must withdraw money from their retirement accounts from 72 to 75, and exempt individuals with smaller accounts from this requirement
From the Office of U.S. Congresswoman Stephanie Murphy
Congresswoman Stephanie Murphy, D-Fla., and Congressman Ron Estes, R-Kan., both Members of the House Ways and Means Committee, introduced bipartisan legislation on Wednesday to improve the required minimum distribution (RMD) rules that apply to retired workers.
Under current law, a retiree generally must begin making withdrawals from their tax-deferred retirement accounts when they turn age 72, with failure to do so resulting in a financial penalty. The Murphy-Estes bill would increase that age from 72 to 75. In addition, the bill would exempt individuals with account balances below $100,000 from the RMD rules, so they could begin withdrawing funds at any age without incurring a penalty. Under current law, retirement accounts of all sizes are subject to RMD rules.
“Because Americans are living longer, raising the age at which they must begin withdrawing funds from their retirement account from 72 to 75 will help ensure that retired workers are not forced to pull money from their accounts before they need it,” said Murphy. “It is also true that most Americans don’t have large retirement accounts. Exempting retired workers with smaller accounts from the mandatory withdrawal rules removes an unnecessary obstacle that prevents them from having greater control over their financial planning and allows their accounts to continue to grow during retirement. I’m proud to lead this bipartisan bill that would ensure more Americans can enjoy a financially independent and dignified retirement.”
“Since my time as Kansas State Treasurer, I’ve focused on increasing retirement security for Kansans and, now, seniors across the United States,” said Estes. “This bill builds on bipartisan reforms passed in the SECURE Act, allowing seniors more freedom to choose when they receive their retirement savings.”
RMD rules are designed to ensure that retired workers use their tax-deferred retirement accounts for retirement, and not as tax shelters or as vehicles for transferring wealth to beneficiaries.
The Murphy-Estes bill, the Required Minimum Distribution Modernization Act of 2020, applies to defined contribution accounts like 401(k)s, 403(b)s, and governmental 457(b) accounts. It also applies to IRAs and Designated Roth IRAs.
The full text of the bill can be found here.