Early Retirement

Mercury News - Retirement account rules catch many by surprise

There's some sentiment that a government rule that forces retirees to withdraw money from their IRA and 401(k) accounts when they turn 70½ may need to be changed. That's because people are living longer and need to keep as much of their retirement money for as long as possible, said several financial advisers and a leader of the Senate Finance Committee.

The required minimum distribution, or RMD, rules force tens of millions of retirees to take money out of their tax-deferred retirement accounts each year. The reason for the forced disbursement is simple: The government figures it's waited long enough for the taxes on that sheltered cash. The rule to force withdrawals, developed more than 20 years ago, also was intended to make sure that tax-deferred retirement accounts are used for their intended purpose and not by those who would accumulate money tax-free to pass on to heirs.