Not Keeping Up With Real Life

There are several special dates and amounts in the Infernal Revenue Code that were established decades ago and have never been updated for current times. One of them is the age at which people are supposed to start drawing out their tax deferred retirement money and paying normal income taxes on it. Our rulers didn't like the idea of people holding on to all of their retirement savings and passing away before they can get their hands on a chunk of it. A rule was enacted requiring that people start withdrawing the money by April 1 of the year after they reach 70.5 years old. The minimum amount of money to be taken out each year is based on an actuarial life expectancy, with the goal being that the last penny is removed as you take your very last breath.

The special age of 70.5 was also based on the assumption that most people would stop working at the normal retirement age of 60 or 65. Socking away a lot of income into retirement plans during high tax bracket earning years, and then withdrawing it in low tax bracket retirement years, has long been a very effective tax planning strategy. However, as this article describes, fewer and fewer people are retiring at the magic age of 65 any longer. While not everyone is still earning a paycheck at 98 (as the woman in the article) or 100 (as with Senator Strom Thurmond), many are still employed well past the 70.5 year mark.

In a rare attempt to bring the tax code more into synch with real life, some of our rulers are trying to pass a law allowing a later start date for the mandatory withdrawals from retirement accounts, or even removing the requirement completely. Afraid of the possibility of less tax money, the DemonRats are working hard to defeat this measure.

I hope every senior citizen understands that, contrary to normal propaganda, the JackAss Party is not their savior. I constantly have to remind people that it was the Clinton-Gore team who drastically raised taxes on Social Security recipients in 1993. With life expectancy continuing to increase, why can't people decide for themselves when to start drawing out their retirement funds?

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 11/23/2002 02:58:00 PM Send this post: