The fiscal cliff battles in Congress seem to have calmed down, but we shouldn’t be lulled into thinking though that the problem has gone away. We remain a nation that continues to spend more than we take in.
The money to ease the debt crisis has to come from somewhere. There’s a good chance the Senate and House will roll over when the Administration approaches them for a vote to put its hands in the taxpayers’ pockets. One undeniably deep pocket for the United States can be found in our collective retirement accounts. According to the Employee Benefit Research Institute, the total estimated US retirement plan assets for 2011 came to $18 trillion.
Here are three proposals the Obama administration has put forth that could seriously affect the ultimate payout on your retirement portfolio.
Capping Retirement Savings
This proposal provides a formula that would specify a limit to the amount of money you could place in your retirement accounts. Currently, that amount is pegged at $3.2 million. While to some this amount might seem generous, it could hobble many retirements. The fact that there’s a limit at all poses a problem in itself.
Five-year Limit on Non-spousal IRAs
If you inherit an IRA, and are not a spouse, you’ll be required to take full distribution of funds over a five-year period. The current rule allows heirs to take distributions throughout their life expectancy.
New Required Minimum Distribution Rule for Roth IRAs
Traditionally, Roth IRAs haven’t been subject to required minimum distributions until the person with the account dies. For this reason, estate planners have favored Roth IRAs. But the administration now wants to make Roth IRAs subject to the same required minimum distribution as other retirement accounts. The law is currently written such that distributions would be required after age 70½.
Budget funding pressures that affect the US taxpayer will continue to surface. Again, in view of the nation’s gargantuan debt, payback has to come from somewhere. Be sure you stay current on administration proposals that would shrink your retirement income. Be sure also that you’ve retained a savvy estate planner, so you can make judicious decisions about your retirement accounts.