Join Early Retirement Today
Closed Thread
 
Thread Tools Search this Thread Display Modes
Senate Finace Committee Votes 26-0 to Kill Stretch IRA
Old 01-01-2017, 07:51 AM   #1
Recycles dryer sheets
 
Join Date: Feb 2015
Posts: 84
Senate Finace Committee Votes 26-0 to Kill Stretch IRA

Recently, the Senate Finance Committee voted 26-0 to do away with the option for non-spouse beneficiaries of a Traditional IRA to stretch the payments over their lifetime using the Single Life Expectancy Table.

Chances are very good this will become law in 2017 or 2018 and the only remaining options will be for a beneficiary to take the money out all at once or over a 5 year period. Still bad news for those of us who have millions in a Trad. IRA with the desire to pass the money to children/grandchildren.

There will be a $450,000 exemption but still beneficiaries will be hit with an enormous tax bill in many cases. So what can we do?

1) Increase Trad. to Roth Conversions to reduce the amount in a Trad. IRA. Sure I am already doing this and may ramp it up a little but one needs to use money outside of the conversion amount for maximum benefit. And who knows how Uncle Sam will screw us on our ROTH's in the future.

2) Do not allow the Trad. IRA to grow untouched until RMD's are required at 70 1/2. Spend down the Trad. IRA instead of spending down from taxable accounts. This helps as beneficaries would inherit taxable accounts at a stepped up cost basis (for now until Uncle Sam changes the rules).

Anything else we can do? I'm sure others have the same concern who have large Trad. IRA balances that they hope to pass onto heirs.
__________________

__________________
MrLoco is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-01-2017, 08:21 AM   #2
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 22,340
This topic was discussed 2 1/2 months ago (and the thread was closed).
Senate Finance Committee Approves Bipartisan Pension Bills
__________________

__________________
MichaelB is online now  
Old 01-01-2017, 08:26 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,147
So this didn't effect the Roth? The beneficiary can still stretch it? I suspect even if this is true, it won't be for long. But at least the beneficiary will be able to withdraw it all without the tax hit.

I have been doing Roth conversions for the past 10 years trying to get as much out of the t-IRA as possible. However, because of my t-IRA riding the bull market I've still got more in there than I started with. Also, being overly successful at creating a cash flow of retirement income I don't have enough leeway now to do significant conversions in the 15% bracket. I've reached the age I can draw from the t-IRA, so I think from now on I'll just do that to fill out the 15% bracket and any other money needs I might have. Other than that, it's just one of those first world problems that my DD will have to suck up.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers
DW and I - FIREd at 50 (7/06), living off assets
harley is offline  
Old 01-01-2017, 08:35 AM   #4
Full time employment: Posting here.
 
Join Date: Dec 2015
Posts: 812
Does this change IRAs that have already been inherited?
__________________
HadEnuff is offline  
Old 01-01-2017, 09:14 AM   #5
Thinks s/he gets paid by the post
frayne's Avatar
 
Join Date: Oct 2002
Location: 19th Hole
Posts: 2,402
Instead of one IRA with a boat load of dinero could you have say, four or five different IRAs in order to keep under the $450 exemption amount ?

Just a thought.
__________________
Doubt is not a pleasant condition, but certainty is an absurd one.
frayne is offline  
Old 01-01-2017, 09:23 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,029
One too many Ed Slott PBS Fund Raising shows. (For those who never watch PBS, Ed Slott greatly popularized the Stretch IRA approach.)
__________________
GrayHare is offline  
Old 01-01-2017, 09:38 AM   #7
Full time employment: Posting here.
 
Join Date: Dec 2015
Posts: 812
Quote:
Originally Posted by frayne View Post
Instead of one IRA with a boat load of dinero could you have say, four or five different IRAs in order to keep under the $450 exemption amount ?

Just a thought.
the article that I read stated the exclusion amount (450K)applied to the "aggregate" account balances of ALL IRAs, 401ks, defined contribution benefits"...so , no, I don't think that approach would exempt any funds.

When my Dad died in 2012 I was surprised to learn that the RMD applied to a Roth IRA, as well as his traditional IRA. So, I'd be surprised if inherited Roth IRAs were treated any differently.
I could never figure out WHY Roth IRAs were subject to the same RMD schedule since it didn't raise any revenue, as the distributions are still tax free.
__________________
HadEnuff is offline  
Old 01-01-2017, 09:47 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,029
Quote:
Originally Posted by HadEnuff View Post
I could never figure out WHY Roth IRAs were subject to the same RMD schedule since it didn't raise any revenue, as the distributions are still tax free.
Without an RMD all the Roth money could be left to grow tax free, whereas growth on an RMD (moved out of the Roth IRA umbrella) becomes subject to tax.
__________________
GrayHare is offline  
Old 01-01-2017, 10:18 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Posts: 1,629
I know it is not wise to have an IRA inside an annuity but with this possible change, I'm wondering.... if one does this close to our children inheriting it, if the annuitization process inside the annuity would have the same restrictions. I'm sure our government covered all the bases but ...it is a question since annuity companies want to hang onto the money as long as possible.

Disclaimer: I don't like annuities and don't have one but have used one in the past as a wealth transfer vehicle with my mother's trust...now dissolved.
__________________
sheehs1 is offline  
Old 01-01-2017, 10:18 AM   #10
Full time employment: Posting here.
 
Join Date: Dec 2015
Posts: 812
Quote:
Originally Posted by GrayHare View Post
Without an RMD all the Roth money could be left to grow tax free, whereas growth on an RMD (moved out of the Roth IRA umbrella) becomes subject to tax.
OK, that makes sense.
__________________
HadEnuff is offline  
Old 01-01-2017, 10:20 AM   #11
Recycles dryer sheets
 
Join Date: Sep 2014
Location: Grapetown
Posts: 493
Quote:
Originally Posted by HadEnuff View Post
Does this change IRAs that have already been inherited?
This has not become law yet. Contact your Congressmen/women and give them an ear full.
__________________
Winemaker is offline  
Old 01-01-2017, 10:22 AM   #12
Full time employment: Posting here.
 
Join Date: Dec 2015
Posts: 812
Quote:
Originally Posted by sheehs1 View Post
I know it is not wise to have an IRA inside an annuity but with this possible change, I'm wondering.... if one does this close to our children inheriting it, if the annuitization process inside the annuity would have the same restrictions. I'm sure our government covered all the bases but ...it is a question since annuity companies want to hang onto the money as long as possible.

Disclaimer: I don't like annuities and don't have one but have used one in the past as a wealth transfer vehicle with my mother's trust...now dissolved.
I thought annuities provided income while you were living, but when you die, the annuity company keeps all the money. How are they used as a vehicle for wealth transfer?
__________________
HadEnuff is offline  
Old 01-01-2017, 11:00 AM   #13
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 7,640
Thank you for your discussion.
__________________

__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Senate Finance Committee Approves Bipartisan Pension Bills Big_Hitter FIRE and Money 55 10-05-2016 03:13 AM
kill kill kill tuixiu Other topics 22 04-19-2009 11:07 PM
The Three Stooges appear before the senate banking committee---wooowooowoo cashflo2u2 FIRE and Money 64 11-22-2008 10:08 AM
Senate Armed Services Committee hooks up the flag officers Nords Other topics 2 10-18-2006 06:47 PM

 

 
All times are GMT -6. The time now is 12:21 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.