Is It R.I.P. For IRA's? - Individual Retirement Accounts
In an October online article in The Wall Street Journal, the reporter described how Congress is examining large IRA’s, and IRA’s holding real estate and closely held business interests. Congress’ concern is that IRA income tax advantages are being used by the wealthy in ways beyond that contemplated by the original legislation. Traditional IRA’s grow tax-free, with no distribution requirements until an individual attains 70 ½. Surviving spouses can receive tax free rollovers from a deceased spouse and thereby enjoy the same benefits. IRA’s can also be "stretched" to provide income tax benefits for children and future generations. More recently, Roth IRA’s, which are funded with after tax dollars, allow tax free withdrawals.
In current times, with social security funding concerns and most employers eliminating defined benefit plans, the need for individuals to plan for their own retirements is even more pressing. So why would Congress attack IRA’s? Well, think Mitt Romney, with over $100 million in an IRA, and others with IRA’s owning business assets that are growing without annual income tax. Of course, at Mr. Romney’s death, unless he leaves his IRA to charity, 40% will be paid to the IRS for estate tax, and his IRA beneficiaries will also be subject to income tax on withdrawals; so perhaps Congress should remember the Government will get their share sooner or later.
Notwithstanding, Congress and the President are examining whether limitations need to be placed on IRA’s. For example, the President wants to prohibit contributions to IRA’s that have more than $3 million of assets. Congress may eliminate stretch IRA’s, mentioned above. Also, Congress is considering greater limitations on the types of assets that can be held by an IRA.
No, it is not R.I.P. for IRA’s. But in this era of budget concerns, IRA’s are another financial mainstay under attack.