Mandatory distributions have long limited IRA growth after retirement but a new deferment policy gives some flexibility.
Despite not always needing to take money out of their IRAs and 401Ks, seniors have been limited in gaining some growth in their accounts by mandatory distributions from the accounts. However, as Smoke Signals reports in "A new, liberating IRA option is available," seniors now have the choice to take lower amounts out of their retirement accounts.
While the rules in the past have required seniors to withdraw minimum amounts from their retirement accounts beginning at age 70½ based on their life expectancies as determined each year by complicated IRS charts, the new policy allows account holders to defer up to $125,000 or 25% of the total amount in their accounts, whichever is lower. The amount deferred does not factor into the required minimum distribution calculation.
The deferment can be taken until age 85, but the money must be placed in a qualified longevity annuity contract as the only premium payment of that annuity. The money placed into the annuity will continue to grow and payments will be made on the annuity when the deferment age is reached.
This new option allows seniors – who don't need to take money out of their retirement account – to continue to increase their income if they wish to preserve those accounts as part of their estates or if they anticipate living longer and might need the money later.
Reference: Smoke Signals (March 31, 2016) "A new, liberating IRA option is available"