End of Stretch
Is it true that congress may end the ability to stretch an IRA and revert back to the five year distribution rule for non spouses?
Is it true that congress may end the ability to stretch an IRA and revert back to the five year distribution rule for non spouses?
Permalink Submitted by Alan Spross on Mon, 2012-02-13 17:58
This was a proposed provision in a current bill, but the provision has already been deleted from the proposal that will be voted on. Nonetheless, even the initial inclusion of such provisions may signal that Congress is looking at all the tax deferred money in retirement plans as a revenue source if distributions are accelerated. The theory is that inherited plans for other than spouses and disabled people have already served the purpose of retirement assets for the plan owner, and beneficiaries should not be depending on a stretchout of inherited plan dollars.
Will just have to monitor the situation to see if this provision or something similar surfaces again in other legislation.
Permalink Submitted by Richard Rittenberg on Wed, 2012-02-15 14:51
The time to start organizing to defeat this is now–this will have the effect of bringing the estate tax back to the middle class. Is there a database that shows number of IRA accounts, total $$, average age at death, average percentage of account remaining for stretch, etc ?? Let’s get the data, and organize an effective lobbying campaign.
Permalink Submitted by KURT FINKBEINER on Wed, 2012-02-15 15:35
Ed’s video response to this Congressional attack on IRAs was right on; we need to look for alternatives in case the money-hungry Congress looks in our direction.
This begs another questions; Ed’s a huge proponent of Roth IRAs. And he’s absolutely correct, based upon today’s rules. Should we be concerned that Congress, in their seemingly never-ending quest for more revenue, will consider the tax-free benefits of the Roth? Will there be overall income limits on the tax-free status? Will there be penalties for withdrawals over a certain amount? Are we paying tax today on a benefit that may be subject to taxation in the future?
If your initial response is, “No Way!,” then remember that Social Security benefits were once 100% tax-free, also.
Just something to think about.
Permalink Submitted by Bruce Steiner on Wed, 2012-02-15 15:55
If you don’t convert to a Roth, there’s also a chance future income tax rates will be higher.