{"id":1111505,"date":"2019-04-17T17:45:22","date_gmt":"2019-04-17T17:45:22","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=107220"},"modified":"2019-04-17T17:45:22","modified_gmt":"2019-04-17T17:45:22","slug":"new-congressional-bill-punishes-ira-holders","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1111505","title":{"rendered":"New Congressional Bill Punishes IRA Holders"},"content":{"rendered":"<p>This post <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/new-congressional-bill-punishes-ira-holders\/\">New Congressional Bill Punishes IRA Holders<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/\">Daily Reckoning<\/a>.<\/p>\n<p class=\"p1\"><span class=\"s1\">Here\u2019s one of my favorite Washington paradoxes\u2026<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">On one hand, politicians say they want to help Americans save more for retirement.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">On the other, they look for every possible way to punish people who actually succeed in the endeavor. <\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">For proof of this look no further than a new bill that recently passed through the House Ways and <\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Means Committee with unanimous support. It\u2019s called the SECURE Act and will soon go to a full vote along with a similar companion bill \u2013 called the RESA Act \u2013 working its way through the Senate.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">The basic aims include:<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Letting employers automatically raise employee 401(k) contributions from a maximum of 10% of pay to a new max of 15%<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Increasing tax credits to small businesses that start up retirement plans and\/or include automatic enrollment features<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Creating new ways for graduate students and other special categories to participate in retirement savings programs<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Plus, allowing penalty-free account withdrawals for births or adoptions<\/span><\/li>\n<\/ul>\n<p class=\"p1\"><span class=\"s1\">On the surface, these don\u2019t sound too bad, right?<\/span><\/p>\n<h2 class=\"p4\"><span class=\"s1\"><b>What You Might be Missing<\/b><\/span><\/h2>\n<p class=\"p1\"><span class=\"s1\">I mean, perhaps we can argue over the idea of default 401(k) enrollment a bit, but there\u2019s no real debate that all of these things are actually trying to improve access and general participation rates to 401(k) plans, which is positive overall.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Yes. And there are other good things in there, too. Stuff like\u2026<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Creating more transparency and portability regarding lifetime income features of certain retirement plans<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">Expanding 529 education plans<\/span><\/li>\n<\/ul>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\">And altering IRA age limits by allowing contributions above 70 \u00bd and raising the start of mandatory RMDs to age 72<\/span><\/li>\n<\/ul>\n<p class=\"p1\"><span class=\"s1\">Still sounds good, eh?<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Well, it does as long as you don\u2019t already have a solid IRA balance and a well-prepared estate plan.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Reason: One of the ways lawmakers want to pay for the SECURE Act is by forcing non-spousal IRA inheritances to get taxed more quickly.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\"><b><i>In short, they want to do away with the \u201cstretch IRA\u201d strategy. <\/i><\/b><\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">I\u2019ve written about this plenty of times before, including right here in the <i>Roadmap<\/i>, but here\u2019s the general idea\u2026<\/span><\/p>\n<h2 class=\"p4\"><span class=\"s1\"><b>Inheriting an IRA<\/b><\/span><\/h2>\n<p class=\"p1\"><span class=\"s1\">When someone other than your spouse inherits your IRA, they face two basic choices:<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">A.<\/span><span class=\"s2\"><span class=\"Apple-converted-space\">\u00a0 \u00a0 <\/span><\/span><span class=\"s1\">Withdraw the whole amount by December 31 of the fifth year after your death<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">B.<\/span><span class=\"s2\"><span class=\"Apple-converted-space\">\u00a0 \u00a0 <\/span><\/span><span class=\"s1\">Begin receiving minimum distributions based on their own life expectancy.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Here\u2019s an example:<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Say you die this year and leave your Roth IRA to your son who is 53.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">If your son decides to take minimum distributions, the IRS will use its actuarial tables (available in <strong><a href=\"http:\/\/www.irs.gov\/pub\/irs-pdf\/p590.pdf\"><span class=\"s3\">IRS pub. 590<\/span><\/a><\/strong>) to figure out roughly how long your son is likely to live.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Then the IRS will divide the value of your account by that number (31.4 this year) to arrive at a dollar amount for yearly distribution.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">In the case of a $100,000 portfolio, your son would have to withdraw $3,289 next year ($100,000\/30.4).<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Now, look into the future many years. <\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">While your son is taking those minimum distributions, the value of his inherited investment account can continue to rise!<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">I\u2019m sure you can see the appeal of this approach, especially since you\u2019re well aware of the effect of compounding.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">And this \u201cstretch\u201d approach is especially good if you leave behind a Roth IRA because there\u2019s never any income tax owed on anything for as long as the nest egg keeps growing and kicking off proceeds.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">That brings me to another point. While this strategy would be great for a son or daughter, it would be even better for a grandchild or a great-grandchild.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Or at least is under current law.<\/span><\/p>\n<h2 class=\"p4\"><span class=\"s1\"><b>If Congress Gets Its Way\u2026\u00a0<\/b><\/span><\/h2>\n<p class=\"p1\"><span class=\"s1\">The whole opportunity will disappear.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Under the SECURE act, non-spousal beneficiaries would have to take out all the money within ten years. The Senate version forces all distributions to occur over five years if the account is worth more than $400,000. There are just a few small exceptions for minor children of the account owners and disabled beneficiaries.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">So basically, if some form of this goes through, a lot of estate plans are going right out the window just like that.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">In other words, these changes seek to help some Americans better prepare for retirement but they do it on the backs of plenty of people who have already been saving and planning for their families\u2019 futures.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">This is par for the course, and something I\u2019ve predicted for years.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Indeed, three years ago, I sent out an email to hundreds of thousands of Americans with the following warning:<\/span><\/p>\n<p class=\"p6\"><span class=\"s1\">\u201cFor the longest time, I liked Roth IRAs for anyone with a long time horizon or for older Americans looking to preserve and grow wealth for future generations.<\/span><\/p>\n<p class=\"p6\"><span class=\"s1\">\u201cBut I\u2019ve been changing my tune recently. That\u2019s because I no longer believe lawmakers will honor the promises they\u2019ve made regarding Roth IRAs.<\/span><\/p>\n<p class=\"p6\"><span class=\"s1\">\u201cAt the very least, I believe Washington will eventually alter the law so that Roth IRA beneficiaries can no longer withdraw their inheritance over their lifetimes \u2014 which was one of the primary reasons I was recommending rolling over assets from a traditional IRA to a Roth.<\/span><\/p>\n<p class=\"p6\"><span class=\"s1\">\u201cMoreover, I believe it is also becoming far more likely that politicians will eventually remove the tax-free benefit on earnings within Roth IRAs\u2026 at least for wealthier Americans.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">So here we are, and phase one is already happening.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Does phase two seem so outrageous, especially when you listen to some of the things being floated by some far-left politicians?<\/span><\/p>\n<h2 class=\"p4\"><span class=\"s1\"><b>The Biggest Takeaway<\/b><\/span><\/h2>\n<p class=\"p1\"><span class=\"s1\">Which brings me to the biggest point I want to make\u2026<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">No matter how well we plan, lawmakers can completely alter the rules of the game any time they want.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">That\u2019s why we also have to continually re-evaluate our own strategies and assumptions.<\/span><\/p>\n<p class=\"p1\"><span class=\"s1\">Moreover, at this point, I suggest you favor approaches and loopholes that give clear, irrevocable benefits instead of relying on some status quo 30 years out\u2026 and that you always maintain one or more backup\/alternate plans just to further limit your exposure to poor decisions made by politicians.<\/span><\/p>\n<p>To a richer life,<\/p>\n<p><img decoding=\"async\" class=\"align-none\" src=\"https:\/\/duip7hn7nchpo.cloudfront.net\/signature-nilus-mattive.png\" alt=\"Nilus Mattive\" \/><\/p>\n<p>\u2014 Nilus Mattive<br \/>\nEditor, <i>The Rich Life Roadmap<\/i><\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/new-congressional-bill-punishes-ira-holders\/\">New Congressional Bill Punishes IRA Holders<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/\">Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This post <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/new-congressional-bill-punishes-ira-holders\/\">New Congressional Bill Punishes IRA Holders<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/\">Daily Reckoning<\/a>.<\/p>\n<p>No matter how well we plan, lawmakers can completely alter the rules of the game any time they want.<\/p>\n<p>The post <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/new-congressional-bill-punishes-ira-holders\/\">New Congressional Bill Punishes IRA Holders<\/a> appeared first on <a rel=\"nofollow\" href=\"https:\/\/dailyreckoning.com\/\">Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center 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