IRS Simplifies Rules on Withdrawing Retirement Money
USA Today (01/16/01) Vol. 17, No. 45 p.1B; Dugas, Christine

The Internal Revenue Service (IRS) is proposing to change its regulations governing how people can withdraw money from retirement plans. The new rules will streamline the decision-making process and allow retirees to change beneficiaries and fix previous distribution elections. The old rules required plan owners who reached the age of 70 1/2 to select a beneficiary and a method of calculation, both of which were immutable and used to determine minimum distribution. The new rules drop the calculation choices and use a simple chart to determine life expectancy, which will mean smaller minimum distributions for most. Accountant Ed Slott says that taking smaller distributions will mean paying less in taxes, thus leaving more money in the estate. The IRS wants to be sure that it collects the tax owed on distributions; in many cases, retirement account balances have become the single biggest asset of U.S. families. Experts contend, however, that the current rules are so complicated that they are almost unenforceable. RDS Inc. head Eric Donner says that the proposed rules would make it easier for the IRS to track minimum distributions. The new rules will become final Jan. 1, 2002, after public hearings take place.


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