Congress is coming for your IRA

[tallguy]

but I just thought that "having enough money" meant you didn't have to think about the damn stuff so much. Having enough money just means you have to think MORE about it.

You don't have to.  You choose to.  That's different.   

[Tiny]

Jul 12, 2019 15:17:51 GMT -5 happyhoix said:

Jul 12, 2019 9:20:24 GMT -5 Value Buy said:

I think we all know many of us here do not consider us really rich, and want to leave something to the kids. That is human nature. Right now, whether you want to believe it or not, out IRA's are growing faster than when we were putting funds into the accounts while we were working.
We are pulling much more than the minimum requirement the last two years to keeep these accounts at a reasonable level in our later years so we do not have the high tax bill in our last years......yeh, first world problem.......but this is Congress pulling the ole rug out from middle America again. AND BASED ON THE CONGRESSIONAL VOTE....it was not a democrat or republican decision. It was all of them.

Another thing, it is all about insurance companies and annuities, or in other words a pay off to Congressional members from big business........

My mom had a nice nest egg of about 400K when she had a stroke and dementia set in.

Spent 5 years living in an assisted living facility and died with less than 80K to her name, divided between 3 heirs.  With Alzheimers  and healthcare costs both increasing, this will be the fate of a lot of the middle class nest eggs you're talking about.  

Who will be able to pay their end of life living expenses and medical bills and still have enough money to leave 500K IRA's to their kids? Not a big number of middle class families.

I think the article is about Untimely Death.   So, say, someone like me (single no kids)  who dies quickly and maybe in my 60's or very early 70's and who has 1 million in a 401K, a healthy pension payment, and SS...     I suspect the tax bracket of my heirs will determine how much of the 401K goes to taxes.     And it doesn't look like any of my heirs will be in that 250K a year household income range - so it shouldn't be too bad. 

[Miss Tequila]

Jul 12, 2019 23:23:42 GMT -5 tallguy said:

Jul 12, 2019 13:02:06 GMT -5 teen persuasion said:

I thought taxable investments got a step-up in basis when you inherit them.

They do.  The earlier discussion bolded here was, for the most part, wrong.  If the heirs sell the stock, CDs, etc. immediately there is no capital gains tax due.  If they wait, they pay tax only on the gains after they receive the inheritance.  Even then, they may not be liable for tax at all depending on income.  Death is the greatest legal tax-avoidance scheme we have. 

This conservative would rather pay taxes that use death as a tax-avoidance!

[tallguy]

Jul 13, 2019 10:00:40 GMT -5 Miss Tequila said:

Jul 12, 2019 23:23:42 GMT -5 tallguy said:

They do.  The earlier discussion bolded here was, for the most part, wrong.  If the heirs sell the stock, CDs, etc. immediately there is no capital gains tax due.  If they wait, they pay tax only on the gains after they receive the inheritance.  Even then, they may not be liable for tax at all depending on income.  Death is the greatest legal tax-avoidance scheme we have. 

This conservative would rather pay taxes that use death as a tax-avoidance!

Yeah, I don't want to pay taxes either, but it's a little bit drastic of a strategy even for me!

[Deleted]

Jul 12, 2019 14:48:24 GMT -5 billisonboard said:

Jul 12, 2019 11:52:23 GMT -5 @x said:

Not many, % of population wise.

But be afraid anyway

Jul 11, 2019 18:56:34 GMT -5 Value Buy said:

... It affects so many people in a very negative way, via tax liabliites.

"Congress is coming for your IRA"

I don't have an IRA. 

That's more of a working class retirement vehicle, for small investments.

[billisonboard]

Jul 14, 2019 8:42:53 GMT -5 @x said:

Jul 12, 2019 14:48:24 GMT -5 billisonboard said:

But be afraid anyway
"Congress is coming for your IRA"

I don't have an IRA. 

That's more of a working class retirement vehicle, for small investments.

Thank you for re-enforcing my point.

[Deleted]

Jul 14, 2019 9:02:19 GMT -5 billisonboard said:

Jul 14, 2019 8:42:53 GMT -5 @x said:

I don't have an IRA. 

That's more of a working class retirement vehicle, for small investments.

Thank you for re-enforcing my point.

I've been agreeing all along. 

That's why I said small %

[teen persuasion]

The question I'm pondering is why did the House pass this nearly unanimously? What did they ALL like in this legislation? How did our reps think the SECURE Act would improve retirement savings in America, the promoted goal of the legislation?

I saw a little tinkering around the edges: removes the upper age limit to contributing to a tIRA (matches the lack of a limit for Roth IRAs). Pushes the first RMD age from 70.5 to 72 (acknowledging extended life spans for some). Allows multi-business 401k plans (this could be very useful in my field - lots of tiny libraries could band together to create one system-wide or state-wide plan). Allows annuities (not convinced this is a plus; think it's open for abuse by financial institutions).

The death of the stretch IRA is getting all the attention. How does forcing inherited IRAs to be drained quickly help anyone save for retirement? Is it just the (tax) price to be paid in exchange for the added perks tinkering around the edges? Taxes pushed onto future generations?

[Deleted]

Jul 14, 2019 15:25:41 GMT -5 teen persuasion said:

The question I'm pondering is why did the House pass this nearly unanimously? What did they ALL like in this legislation? How did our reps think the SECURE Act would improve retirement savings in America, the promoted goal of the legislation?

I saw a little tinkering around the edges: removes the upper age limit to contributing to a tIRA (matches the lack of a limit for Roth IRAs). Pushes the first RMD age from 70.5 to 72 (acknowledging extended life spans for some). Allows multi-business 401k plans (this could be very useful in my field - lots of tiny libraries could band together to create one system-wide or state-wide plan). Allows annuities (not convinced this is a plus; think it's open for abuse by financial institutions).

The death of the stretch IRA is getting all the attention. How does forcing inherited IRAs to be drained quickly help anyone save for retirement? Is it just the (tax) price to be paid in exchange for the added perks tinkering around the edges? Taxes pushed onto future generations?

My opinion is you pretty much answered yourself, as to why they almost unanimously passed this.  (bolded)

That is also my take on it.

[Tiny]

www.msn.com/en-us/money/taxes/the-irs-is-eyeing-your-inherited-money/ar-AAEkKKt  


Here's the "pros" for the SECURE Act: 


The noncontroversial good stuff

The SECURE Act is allegedly intended mainly to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. Good. And it would allow you to continue to make contributions to traditional IRAs after reaching age 70½, which is not permitted under current law. Fine. It would also raise the age that you must begin taking mandatory IRA and retirement account required minimum distributions (RMDs) from the current 70½ to 72. Also good, but only a minor improvement. The SECURE Act would make other IRA and retirement plan changes that are, arguably, noncontroversial.


I believe the biggest effect would be on inherited ROTH IRAs  as they avoid all taxes on growth.    

I'm not quite sure how the average Joe would get 500K or more into a ROTH (the example in the article)   with the income limits and the limit on how much you can put into a Roth.     So, I'm guessing the author's target audience are the clever very wealthy who had the ability to get big $$ into a Roth.    

My opinion:  Roth/Traditional IRAs (and those other "ira" like vehicles)  are RETIREMENT money.   It's meant to be USED - by the "owner" of the account(s) or their spouse when they are old (and no longer have an 'employer').       RETIREMENT vehicles are not intended to preserve one's wealth for generations.     

I'm pretty sure pension benefits aren't intended to preserve one's wealth for generations - same with IRAs.   

The wealthy will just have to find some other way to pay no taxes on their millions.   

[tallguy]

Inherited Roth IRA's are not taxed anyway as long as the account met the five-year rule, so this has no effect on the tax considerations of a Roth.  I haven't gone through the proposed legislation yet, but I thought the big change was eliminating the "stretch" IRA and requiring distributions to beneficiaries over a shorter period as opposed to over a lifetime.

I am actually not opposed to this either.  An IRA receives favorable tax consideration as an incentive for people to save for their own retirement.  It should not be an estate planning tool in the traditional sense.  The tax advantages are for the benefit of the worker.  Allowing the beneficiary to spread out distributions over ten years is good enough.  There are other ways to do estate planning.     

[teen persuasion]

Jul 15, 2019 12:52:15 GMT -5 Tiny said:

www.msn.com/en-us/money/taxes/the-irs-is-eyeing-your-inherited-money/ar-AAEkKKt  


Here's the "pros" for the SECURE Act: 


The noncontroversial good stuff

The SECURE Act is allegedly intended mainly to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. Good. And it would allow you to continue to make contributions to traditional IRAs after reaching age 70½, which is not permitted under current law. Fine. It would also raise the age that you must begin taking mandatory IRA and retirement account required minimum distributions (RMDs) from the current 70½ to 72. Also good, but only a minor improvement. The SECURE Act would make other IRA and retirement plan changes that are, arguably, noncontroversial.


I believe the biggest effect would be on inherited ROTH IRAs  as they avoid all taxes on growth.    

I'm not quite sure how the average Joe would get 500K or more into a ROTH (the example in the article)   with the income limits and the limit on how much you can put into a Roth.     So, I'm guessing the author's target audience are the clever very wealthy who had the ability to get big $$ into a Roth.    

My opinion:  Roth/Traditional IRAs (and those other "ira" like vehicles)  are RETIREMENT money.   It's meant to be USED - by the "owner" of the account(s) or their spouse when they are old (and no longer have an 'employer').       RETIREMENT vehicles are not intended to preserve one's wealth for generations.     

I'm pretty sure pension benefits aren't intended to preserve one's wealth for generations - same with IRAs.   

The wealthy will just have to find some other way to pay no taxes on their millions.  

I couldn't read the article (some "oops, can't find it" on the site), but a diligent saver should be able to reach $500k in a Roth IRA, if I can exceed $100k in just 10 years, starting at age 43. That's just IRA contributions, only 2 were +catchup contributions, no conversions, no mega backdoor, no inheriting a spouse's IRA. If I'd started in my 20s...

[tallguy]

My plan is to save my Roth IRAs until closer to the end while I spend down my traditional IRAs.  I may make some small Roth withdrawals along the way if I want some extra tax-free money, but I would much rather leave my Roths and my taxable accounts to be inherited if I die early.  That being said, I may end up with half a million in my Roths at some point.  I have converted some already, but I never earned a high salary.  And I retired early.  My big decision is whether I want to do a large conversion this year and take a tax hit up front.  If so, I will certainly end up with over that in my Roths.  It should not be all that difficult for an average person, if they dedicate themselves to the goal of securing their financial future.  

[Deleted]

Jul 15, 2019 12:52:15 GMT -5 Tiny said:

www.msn.com/en-us/money/taxes/the-irs-is-eyeing-your-inherited-money/ar-AAEkKKt  


Here's the "pros" for the SECURE Act: 


The noncontroversial good stuff

The SECURE Act is allegedly intended mainly to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. Good. And it would allow you to continue to make contributions to traditional IRAs after reaching age 70½, which is not permitted under current law. Fine. It would also raise the age that you must begin taking mandatory IRA and retirement account required minimum distributions (RMDs) from the current 70½ to 72. Also good, but only a minor improvement. The SECURE Act would make other IRA and retirement plan changes that are, arguably, noncontroversial.


I believe the biggest effect would be on inherited ROTH IRAs  as they avoid all taxes on growth.    

I'm not quite sure how the average Joe would get 500K or more into a ROTH (the example in the article)   with the income limits and the limit on how much you can put into a Roth.     So, I'm guessing the author's target audience are the clever very wealthy who had the ability to get big $$ into a Roth.    

My opinion:  Roth/Traditional IRAs (and those other "ira" like vehicles)  are RETIREMENT money.   It's meant to be USED - by the "owner" of the account(s) or their spouse when they are old (and no longer have an 'employer').       RETIREMENT vehicles are not intended to preserve one's wealth for generations.     

I'm pretty sure pension benefits aren't intended to preserve one's wealth for generations - same with IRAs.   

The wealthy will just have to find some other way to pay no taxes on their millions.   

It's easier than most would think. 

[Tiny]

Hmmm... median income is between 50k and 60k per household accros America. Maybe I should have said "Median Joe" 

So, lets say a 24 yo starts out at 30K per year and manages to save 10% of their gross in a Roth IRA that they just opened (or maybe they save up the 10% for a year so they have enough to open a Roth IRA).  Their employer doesn't offer any sort of retirement account.        (FWIW:  I don't know how many people earning 30K (with no other significant source of income) would be able to save 3K per year for retirement.  

Let's assume they get 2.5% raises every year and continue to save 10% of their income. 
In year 10 they are earning $37, 465  and  have saved a total of 33, 610.15.   They are now 34 yo.   
At 44 they are earning 48K 
at 54 they are earning 61K  
and if they work to 64 they are at 78K   

They've managed to save 202K  which doesn't include any growth.    

If they paid attention and diversified their investments - they probably  will have 500K  in their account. 
If they were super conservative (or had a fear of investing) they might not have doubled their $$.   

I'm not sure how feasible committing to saving 10% of one's 30K income is...  young people tend to have alot of "bills".      

OK, I'll give you that  a Median Joe with a life time of being "median" would possibly have 500K in their Roth.   They probably don't have a pension (they are median after all) and will be relying on their Roth and SS and whatever other $$ they have saved for their "golden years".  
 
But,  that Median Joe most likely wasn't saving this money to provide wealth for his children or their children.   He was saving it for his and his spouses "golden years".     And the Roth would provide a means for  him and his family. 

 
   

[teen persuasion]

Jealous of Median Joe's income.

At age 24, DH probably made $18k.
Age 34, made $35k with lots of overtime. Then the plant closed due to some NAFTA thing. Grad school and lived on unemployment.
Age 44, DH beginning to get back to mid $30s, I begin part time, $6k
Age 52, DH just exceeded $50k for first time, I just exceeded $20k.

Yet we have > $500k in retirement. DH had nearly $40k in retirement just before the 2008 recession hit (he was contributing 5% to get the match, and they cut the match). DH wanted to stop contributing anything because it was pointless w/o a match, I began ramping his contributions up slowly to compensate for the lost match. So we have accumulated most of that in 10ish years.

[djAdvocate]

Jul 16, 2019 14:46:24 GMT -5 teen persuasion said:

Jealous of Median Joe's income.

At age 24, DH probably made $18k.
Age 34, made $35k with lots of overtime. Then the plant closed due to some NAFTA thing. Grad school and lived on unemployment.
Age 44, DH beginning to get back to mid $30s, I begin part time, $6k
Age 52, DH just exceeded $50k for first time, I just exceeded $20k.

Yet we have > $500k in retirement. DH had nearly $40k in retirement just before the 2008 recession hit (he was contributing 5% to get the match, and they cut the match). DH wanted to stop contributing anything because it was pointless w/o a match, I began ramping his contributions up slowly to compensate for the lost match. So we have accumulated most of that in 10ish years.

you have done way better than me.

I have less in my retirement than you do, and I am older than you, and my income was way higher.

but I did very different things with my money.

90% of my money is tied up in businesses I own.

but congratulations for your saving and planning, again.  much kudos.  if I had saved as well as you, I'd be way richer.

[Tiny]

Jul 16, 2019 14:46:24 GMT -5 teen persuasion said:

Jealous of Median Joe's income.

At age 24, DH probably made $18k.
Age 34, made $35k with lots of overtime. Then the plant closed due to some NAFTA thing. Grad school and lived on unemployment.
Age 44, DH beginning to get back to mid $30s, I begin part time, $6k
Age 52, DH just exceeded $50k for first time, I just exceeded $20k.

Yet we have > $500k in retirement. DH had nearly $40k in retirement just before the 2008 recession hit (he was contributing 5% to get the match, and they cut the match). DH wanted to stop contributing anything because it was pointless w/o a match, I began ramping his contributions up slowly to compensate for the lost match. So we have accumulated most of that in 10ish years.

Damn.  You've done an amazing job saving AND investing to grow 40K to 500K in 11 years or so.   
  

[teen persuasion]

Refundable tax credits like EITC and CTC and AOTC gave us more to save. Save as much as possible in traditional 401k for tax reduction and low AGI, put refundable credits in Roth IRAs.