RMDs -- What No One Seems To Ever Mention -- 2024 Huge Year For IRAs -- See Why -- Originally Posted January 25, 2024 -- Re-Posted March 27, 2024

Locator: 46855INV.

The US market.

• S&P 500 closes at 5,248, a new all-time record.
  
• AAPL: up $3.60 today; up over 2%. See if you can connect the dots with this one below.
  
• This sure doesn't feel like an impending recession. CNBC analysts and talking heads have pushed concerns for a recession out to 2025.

Where's all this money coming from?

• Covid-19 stimulus money;
• Milton Friedman's velocity of money;
  
• my favorite chart;
• IRAs: see below
  
• southern surge: a $7 trillion gift
  
• (this would require a stand-alone blog -- but elevator speech: federal and state aid; a new agency within the Department of Homeland Security?) 
• TSA: $11 billion budget; 60,000 employees
• Citizenship and Immigration: <$1 billion; 4,000 employees
  

Baby boomer age wave theory: link here.

• baby boomers: note the size of this demographic at the link;
• who has all the money? who has all their medical care expenses paid for? whose houses are paid off?
• birth years: 1946 - 1964
• ages (2024): 60 years old - 78 years old; mid-range: 69 years old -- today, 2024
  
• IRS: RMDs -- about 4% annually

• ICYMI: in the box above, it's trillion with a "t." That's even more than Elon Musk's bank account.
  

Addictions:

• baby boomers: booze, cigarettes, gambling, muscle cars, sports, making money, malls, products,
• big families, extended families (inherited money diluted to "barely enough to live on"))
  
• millennials, Gen Zers: tech, travel, home delivery, services
• small families (inherited money remains concentrated)
  

Quick: name a time in the history of the US with the same data points, demographics, and addictions.

Updates

March 27, 2024: one year later ...

• "Max" chart:

Original Post
January 22, 2023

Key dates to remember with regard to IRAs:

• 1970
• 1981
• 1997

When did IRAs truly start to impact the economy? I would argue, 1995, to some extent, but then took off in 2007:

• 1970: traditional IRA introduced
• 1980: folks became comfortable with IRAs
• 1997: IRAs improved by a huge amount with the introduction of Roth IRAs
• 2007: another ten years of traditional IRA / Roth IRA growth in popularity

Now, look at this graph:

 Same chart with markers and comments:

Demographics, US:

Look at this, and no one seems to be mentioning this.

Age when one can start taking distributions from one's IRAs: 59.5 years of age.

IRA RMDs by demographic (note, data is somewhat old):

• silent generation: minimal impact on economy with regard to RMDs
• those who have IRAs are probably using RMDs for nursing home expenses
• baby boomers: biggest impact on economy with regard to RMDs
• those born in 1964: turn 78 years of age this year
• those born in 1946: turn 60 years of age
• in other words, every -- repeat, every baby boomer can now take RMDs
• my wife has been taking distributions before they were required and now RMDs for maybe ten years and despite the withdrawals year-after year, her IRA continues to grow
• I start taking my first RMDs this year 
  
• almost all baby boomers can now tap into their social security benefits
• almost all baby boomers are covered by Medicare. Medicare benefits got even better in 2024 (thank you, Mr Biden), seniors will spend less money on healthcare (all things being equal)
  
• 529s: a lot of baby boomers (GRANDPARENTS) are going to look for tax-advantage accounts to place RMDs they don't need for current expenses
• 529s have vastly improved starting this year (or last year?) making these investment vehicles look even better -- I'm having trouble finding a better place to re-invest my RMDs
• interestingly, one can argue that 529s are even better than IRAs
  
• generation X: will start to make impact this year but not much, but it will continue to grow every year for the next decade or so
• those born in 1980: turn 44 years old this year; no impact on economy with regard to RMDs but starting to hit max income / max productive years of their lives
• the younger Xers, now in the best years of their lives, financially, are now more likely to fund IRAs and that will help set a floor for the equity market; 
  
• those born in 1965: turn 59 years old this year!
  
• this is the biggie
• starting this year, generation X folks can start tapping their IRAs; it doesn't mean that they will but it means that if they don't, they have enough other income to offset any need for IRA distribution (meaning strong financial status for those folks)
  
• again, this is huge
• Roth IRAs have been around 27 years and the last 27 years have been great for investors, but
• even better: the way the market behaved last year and how the market is now behaving in the second half of January, 2024, a lot of folks are getting excited
• my hunch: a lot of folks are taking some / all of their RMDs this month; if not their entire RMD, taking a fourth to half of their annual RMD
• only a few more years and Xers will also be able to access social security benefits, also 
  

On top of all this, this "RMD story" is not going to go away. Year-after-year RMDs will increase in dollar amounts, but whether they increase or not, they will never quit.

And we haven't even begun to talk about "inherited RMDs":

• "inherited RMDs"? Reminder, oldest baby boomers turn 78 years of age this year -- IRS life expectancy for IRAs tend to trend toward 100 years of age -- taking only minimal RMDs, the vast majority of IRAs will still be funded and growing when their own dies.
  
• unlike owners of IRAs who can spread their RMDs over a life expectancy (26 years or longer), beneficiaries (those who inherit IRAs) must deplete those IRAs in ten years.
• one word: wow.