The Great 2019 Christmas Heist: Congressional Grinch Targets IRAs

Last week Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act that made several changes to retirement account rules. And as the old saying goes, Congress giveth and Congress taketh away.

The reaction of a somewhat irritated grandchild upon hearing about the SECURE Act.

Happy holidays! I hope you spent the last few days exactly as you wanted to - with family and friends, holidaying or relaxing, or even working if that is what brings you great joy! WynnSights just celebrated six months of life on Christmas Eve so I want to take this opportunity to thank everyone who has set eyes on this blog, whether it be once or several times, because you are what really brings it to life! If you ever have an idea for a blog post, or a question or subject you'd like me to explore, please email me and I will do my best to oblige!

Now...I am sorry to switch the mood from joyful to somber, but I would be remiss if I did not share and comment on breaking news in the IRA world. Here goes...

The So-Called SECURE Act

Last week Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act that made several changes to retirement account rules. And as the old saying goes, Congress giveth and Congress taketh away. Their year-end spending package will limit a very popular feature of traditional and Roth IRAs – the ability of savers to extend the life of their retirement accounts by leaving unspent balances to much younger heirs (e.g., grandchildren).

Whoa, That Soon?

After December 31, 2019, certain young heirs will no longer be able to take required withdrawals over their lifetimes, greatly limiting the time they can receive tax-free or tax-deferred compounding. Beginning in 2020, many heirs must withdraw inherited IRA assets within 10 years rather than based on their own life expectancy (called “stretching”).

Thanks, Kevin

Even top Republicans, many on the House Ways & Means Committee, including Kevin Brady of Texas, supported this heist. Brady’s reasoning (summarized):

Tax-favored retirement funds should be used for the owner and spouse’s retirement security, not as wealth succession management tools.

Don’t you love it when Washington politicians tell you how to plan your financial future, and then change their mind on a whim? Most graciously (sarcasm), they exempted surviving spouses from this revision of the rules – rules that will highjack certain affected IRA beneficiaries of an estimated $16 billion… call it a tax increase if you’d like… over the next decade (Source: Joint Committee on Taxation).

Happy New Year! (It's a Congressional election year, by the way!)