One thing you can count on Congress for is to always be changing things. The House of Representatives recently passed a new bill call the SECURE Act. This act, in its current form, will make some pretty significant changes to retirement accounts (both IRAs and 401(k’s)).  If it passes and is signed into law in substantially the same form, it will make some pretty good changes. First, it will increase the age that required minimum distributions must be taken from the current age of 70.5 to 72 years old. There will not be an age limit for contributing to the IRA, so you can contribute for as long as you want. There will be an expanded ability to withdraw the money early without penalty, although it is in pretty rare circumstances.

But the biggest problem is with the time period that a non-spousal beneficiary will be allowed to stretch out withdrawals from an IRA. Under the current rules, a non-spousal beneficiary can withdraw a little bit of money out of the inherited IRA over the beneficiaries anticipated life expectancy. This “stretch” is generally good for the beneficiary because they inherit more money as, theoretically, the stock market increases over time. It is good for the government, because while the percentage of tax paid by the beneficiary will be lower and it is stretched out for a long period of time, the government actually gets more money in taxes (again because of anticipated market gains). What the SECURE Act currently states is that the longest payment stretch is no longer for the lifetime of the beneficiary but will be limited to 10 years. In other words, the government no longer wants to wait a lifetime for its money. This will result in greater taxes paid and lower benefits of retirement accounts to your beneficiary.

As of the time of this writing, the Secure Act still has not passed the Senate and has not yet been signed into law, so there is still hope that Congress will address this critical issue.

You can read more information by looking at this document from the Ways and Means Committee: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SECURE%20Act%20section%20by%20section.pdf

Or by reading this article from Kiplinger Online:

https://www.kiplinger.com/slideshow/retirement/T047-S001-how-the-secure-act-could-impact-retirement-savings/index.html

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