Here's a news flash: the IRS offers a calculation that actually helps consumers. Who knew?
Little surprise, Alicia Munnell, director of the Center for Retirement Research at Boston College, took to the pages of SmartMoney Tuesday to decry the standard 4 percent withdrawal rate. What is surprising is the alternative she offered—the IRS' required minimum distribution.
Mostly seen as a nuisance for those who don't need it, the RMD forces investors to begin taking a minimum amount of money out of a tax-deferred savings vehicle at age 70 ½. The reasoning is twofold: the IRS wants their tax revenue, and the larger government wants the money in circulation. However, if investors base their non-RMD withdrawal rate on the RMD itself, it acts as a good alternative to the standard (and controversial) 4 percent rate.
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