November Series: Retirement Accounts and Proposed Tax Legislation

November Series: Retirement Accounts and Proposed Tax Legislation

November 10, 2021

One of the biggest savings buckets for many Americans is their retirement account. Between IRAs, 401(k)s and pension plans, that’s where the majority of people are funneling their savings in anticipation of retirement one day.

Rules regarding the distributions of IRA dollars have made headlines, most recently with the Secure Act and now they’re facing media attention again with proposed legislation changes that could impact the way your IRA or Roth IRA is handled.

One of the most notable proposed changes is the limitation on large retirement balances. For high income individuals, the bill proposes that any aggregate retirement accounts with balances over $10 Million face a minimum distribution in the following year. The distribution would be 50% of the balance over $10M. This includes traditional IRAs, Roth IRAs, as well as Defined Contribution plans.

Another prominent change is the elimination of Roth conversions, commonly known as “Backdoor Roth’s.” The bill proposes this change for high income earning families with taxable income of $450,000 or more, married filing jointly.

We often see a variety of investments in IRAs, including some that are typically only offered to accredited investors. This legislation suggests that all IRAs moving forward will only be funded with registered securities. IRAs holding investments outside of this could lose their IRA status.

In upcoming months, we will likely see changes in tax law and the treatment of retirement accounts may be adjusted. In anticipation of these things, we want to make sure there’s a plan in place to help you effectively save for your retirement one day. Whether that’s completing Roth conversions while we still can, determining the best savings vehicle for your situation, or simply talking through the potential impact of these modifications, now is a great time to connect with a wealth advisor and understand what this could mean for you.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.