Request to Vern Buchanan: Help our retirement nest eggs

Dear Rep. Vern Buchanan:

As a retiree living in your district, I respectfully suggest you submit an amendment to the Republican tax legislation that would save retirees’ nest eggs and, at the same time, increase future revenues.

Under current law, retirees must take “required minimum distributions” each year beginning with the year they turn age 70 1/2. The RMD for each year is calculated by "dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy."

So, each year, we are required to deplete our life savings by thousands of dollars just so the federal government can claim taxes of a few hundred.

Do you see where this leads? Each year your senior citizens’ nest eggs are diminished, and each year the government gets less and less in taxes.

This can be reversed, and government revenues will rise.

The same formula can be applied, with one little tweak. Tax us on what the RMD would have been, but allow us to leave the RMD amount in our IRAs or related investment vehicles.

By only withdrawing the required tax, chances are — through interest earned — the account will grow during the next annual cycle. Perhaps enough to recoup that which was taken. If not, it is obvious there will still be more money remaining in the account to generate a larger tax contribution each following year than if the whole RMD had been withdrawn. And, quite possibly, interest earnings will increase the principal even further, making for even greater tax revenue in following years.

I hope you will give this suggestion the serious attention it deserves. Between the Great Recession and mandatory RMDs over the past five years, we have watched the principal in my wife’s small SPDA drop from an initial investment of $100K+ to just over $75,000. Instead of earning a decent return, those RMD withdrawals are sitting in a bank account drawing ridiculously tiny interest. That’s because we are told, at our ages, most other investments would be “too risky.”

This story was originally published November 8, 2017 at 2:50 PM with the headline "Request to Vern Buchanan: Help our retirement nest eggs."