Articles Tagged with Stretch IRA

1.7.20“A new law could affect the IRAs and 401(k)s of millions of Americans in 2020.”

The SECURE Act is the most substantial change to our retirement savings system in over a decade, says Covering Katy (TX) News’ recent article entitled “Laws Change for IRA and 401K Retirement Savings Plans.” The new law, called the Setting Every Community Up for Retirement Enhancement (SECURE) Act, includes several important changes. Let’s take a look at them.

There is a higher age for RMDs. The current law says that you must start taking withdrawals or required minimum distributions from your traditional IRA and 401(k) or similar employer-sponsored plan when you turn 70½. The new law delays this to age 72, so you can hold on to your retirement savings a while longer.

Arm wrestling over moneySavvy individuals, estate planning lawyers and financial advisors are not averse to finding unintended benefits when Congress makes changes to laws regarding retirement accounts and Social Security payments. Unfortunately, when too many of these techniques are discovered and shared widely, the government sees revenue slipping away. Three of these loopholes have drawn the attention of various government agencies and may be changed in the near future.

A recent Reuters article, titled “3 Retirement Loopholes That Are Likely to Close,” discusses some of the loopholes that can be found, as an unintended result, due to changes in law.

Back-Door Roth IRA Conversions. Congress created this loophole by lifting income restrictions from conversions from a traditional IRA to a Roth IRA, but not placing such restrictions from the contributions to the accounts. As a result, those whose incomes are too high to put after-tax money directly into a Roth IRA so it can grow tax-free, instead are able to fund a traditional IRA with a non-deductible contribution then convert it to a Roth. Taxes are usually expected in a Roth conversion, but this work-around doesn’t cause much liability, the article explains, provided the contributor doesn’t have other money in an IRA.

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