Changes Ahead for IRAs

Changes Ahead for IRAs

With the recent release of President Obama’s proposed budget and Congressman Dave Camp’s (R-MI), draft tax reform legislation, Individual Retirement Accounts (IRAs) have come into focus.  The proposals could have a significant impact on Americans’ ability to save for retirement.

President Obama’s Budget Proposal:

  • Required minimum distributions (RMDs) for Roth IRAs.  Withdrawals would be mandated beginning at age 70-1/2.
  • Non-spouse inheritors of Roth IRAs required to withdraw all funds within 5 years.
  • Caps placed on the total amount that could be held against tax-deferred retirement accounts.  Savings would be capped at a level that would provide $205,000 in retirement income annually, or about $3.4 million in current total account balances.

Congressman Camp’s Draft Tax Reform:

–        Prohibition on contributions to traditional IRAs; new contributions only on an after-tax basis.

–        Repeal of rules allowing for recharacterizing Roth IRA contributions or conversions.

–        Maximum annual contributions to IRAs (currently $5,500) frozen for 10 years.

The Savings Coalition of America supports incentives for Americans to save their money and ensure a financially secure future.  We encourage policymakers to preserve current incentives and work together to adopt policies that encourage increased savings.

Personal Savings Under Stress

After a slight rebound during the most recent recession, Americans’ personal savings rate appears to have resumed its long-term decline.