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The McDermott Law Offices Blog is a place where you can find information on legal developments affecting you, your family and your business:

IRA's And Other Retirement Accounts To Be Curtailed Under Obama's 2014 Budget?

MPMM Law - Tuesday, April 16, 2013

Are there potential big changes coming to retirement planning ? Maybe.

The Wall Street Journal reported in its April 14, 2013 online edition that within President Barack Obama's budget for fiscal year 2014, are proposed changes that would impact Individual Retirement Accounts (IRA's) and other tax deferred savings plans, including 401(k) plans.

The proposal to put a lifetime cap on savings in individual retirement accounts and other tax-deferred retirement-savings vehicles, including 401(k) plans and corporate profit-sharing plans is getting attention.

Also, the favorable IRA "Stretch Out" distributions for the beneficiaries of an IRA owner may be curtailed. Under current rules, people who inherit IRAs can "stretch" their withdrawals across their life expectancies, paying income tax only on the amounts they remove from the account and continuing the tax deferral on any earnings inside. Obama's budget proposal would force heirs (other than surviving spouses) to empty such retirement accounts within five years, accelerating payment of taxes due. The Wall Street Journal indicates that billions in additional governmental review would be generated by eliminating "Stretch Out" distributions.

We will update our blog with any future developments on this.

IRS Circular 230 Disclosure Notice: The information herein is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or any other applicable tax authority.