IRA, IRS, Joe I discussed on Your Money, Your Wealth


Our other free punisher resources like the Roth IRA basics white paper. Newly updated twenty nineteen we've gone retirement lifestyles guide the social security handbook him hundreds of educational videos in more click on that special offer. If you want the book, they're going like hotcakes out. Yeah. They are. It's a good book. It's a very easy read, and it will take you probably I don't know at the most two hours. Yeah. That's probably take you about a week, fifteen minutes. Go to bed. That's right falling asleep. That's fall asleep. Do. That's why you've read swam. Well, just in general. That's why have breezes on my forehead when the. Look. Wow. A hardcover book. We have a new Bill. Let's talk about that. Because we get some Email questions in regards to retirement accounts. Let's kind of yes. So earlier this month show, the house and ways how House Ways and means committee passed what they called the secure act, which was to make our retirement more secure and among other things they talked about increasing the the age for the required minimum distribution from seventy and a half seventy-two and having incentives. I guess for players to to set up for a one K plans or to have kind of auto withdrawals some tax credits and things like that. But. Spend how much time on this? I don't know how much government money, right? All right. So you got this committee. They sit in the meat in the Chadli talk. And then they, you know, the gone road show try to get votes. And then sent I mean, this is probably millions of millions of dollars just to put this Bs together. And it's really the only thing that's good about this halfway decent is the whole stuff for small employers to get a little bit of a tax credit to put together a 4._0._1._K plan. So more individuals will have access to a retirement account, everybody else's BS. Well, it doesn't have a huge impact. Anything though from seventy and a half to seventy two year and a half. Right. But it's called the secure act. Oh, it's going to secure better jobs. Here's the thing. That's just surfacing. Because anytime there's a Bill like this. There's all kinds of pages. But now, we're realizing what's in fear. Now that this is. Lies just that the House Ways and means committee passed it so tucked away in the Bill is a provision that would force most non spouse beneficiaries to dry down inherited retirement accounts within ten years after the regional owner's death, which is contrasted with how it is right now right now, a non spouse beneficiary can do the stretch IRA and d required. Minimum distributions over their lifetime. So if someone's twenty and inherited IRA, they can they can rent it out to their eighties. But this is saying at least in this Bill. It has the come out in ten years. Meaning that the distributions are higher. Probably putting you in a higher tax bracket requiring more tax paid, right? I think of it like this you have a retirement account a sizable retirement account. I'm so this is only going to affect those individuals that have saved money, right? So their retirement is basically pretty much secure already is right. So let's blow those people up. Let's make it unsecure. So here I've saved diligently through my life, and I've accumulated some cash in my retirement account. And let's say I don't spend through all my cash before I die, and I still have money left over in my retirement account that is going to go to a non spouse benefit, Sherry, if it goes to your spouse, it's fine. They can treat it as their own. But when both spouses, or if you're single in a goes to niece, nephew, maybe a child or whatever of the the ability to basically say, all right? We'll thank you for this. Nice. Inheritance? I am going to take a little bit out of this account each year and spend it or maybe reinvest it, but the IRS has you have to take a little bit of money out because we want to recycle it, so we can get our tax money. Right. And so if I'm a younger beneficiary it worked out pretty well for those individuals because they have a huge tax Bill today the inherited so they could continue the stretch those those tax dollars out over their life. So now, they're saying let's try to get rid of that. And then you're either going to have to. Take it out all within ten years. So if it's a small account who cares. No big deal. The beneficiary of the kids are just going to take out the move on. Yeah. That's what happens with most small counts anyway, twenty thousand dollar retirement account. Yes. You pay the tax. Car, but let's see two million dollar account, right or one point five two million three million. And then it's like, okay. Well, here now, I gotta pull all these dollars out. That's gonna blow it up. You're gonna lose half of the overall account. Just because of the taxation those retirement accounts are in tax. So the larger the account the more tax potentially is going to be to that beneficiary. So now, the at least eliminate some of the tax right, or at least that harsh bite of the tax by stretching it, but now they're standing eight. Well, you're going to have to take out within a ten year time period, and I should mention that. That's the house version of this Bill. There is a Senate version which also is the tacking stretch areas, but in it'll a different way attacking right or the the Senate version would distribute the account in five years, if the beneficiaries not a spouse and the count value exceeds four hundred thousand dollars as of the date of death. So I wonder where they came up with that number. I don't know. But we've heard. That before I remember for fifty years ago through that's too much. Well, yeah, we need to pull the Stelle little bit to get more money. Right. So it's it's basically what's going on here. Just just the kind of weed through all this is the IRS is in our government. I should say the government is looking for ways to get more tax dollars. And if you force the dollars out of an IRA more quickly than there's going to be more taxation more quickly and more dollars into our treasury. Couple of other things when it comes to inherited IRA's is that now those are subject to bankruptcy because what we've we had that Email earlier in the show, and they were saying what about IRAs Orissa plans support key plans versus separates in for bankruptcy purposes. They're treated exactly the same. But if I'm inherited IRA or inherited a 4._0._1._K, those do not have the same rules that apply because it's not necessarily your retirement account. It was the owners retirement account. You're just a beneficial owner read those are not subject to big protection in regards to the. The IRS co today or the government and just that we talked about this first segment, but April first they increase the amount of areas that are safe from bankruptcy. It's a little over one point three million dollars one one point three six two I IRAs only IRA's only if you look if I just had an IRA. I mean, what's the maximum contribution seven thousand dollars? Right. So if I started putting money into IRA's back in forty years ago. I mean, accumulate a million dollars is pretty good. Yeah. Where we see the million dollar balances or two million dollar balances is from 4._0._1._K roll over. Yeah. Exactly. And what the with at least what the current rules bankruptcy. This is federal government states may have slightly different rules. But the federal government's says that if it's a rollover from a 4._0._1._K or in Orissa type plan, it's unlimited. So even if it's co mingled with your IRA of oh, I think best practice would be to leave it separate from your IRA just the contract differently. Yeah. If you concerned about bankruptcy. Sure. Right. If you've got a couple million bucks. You know, you never know stranger things have happened. But I guess what's the takeaway? What's the what's going on? What are they thinking? I mean, this is what the secure act. I don't know. I mean, you know. So does it make sense to have the most of your liquid wealth in a retirement account? I dunno. If depends on what your goals are. But if you're trying to pass them in the wealth of the next generation, maybe retirement accounts are probably the worst place to have them. Now. Here's what I think. Joe I think because they want to increase the required minimum distribution date from seventy and a half, the seventy give they're using the same tables, aren't they in regards to the percentage that you pull out that I don't know. But at seventy two instead of pulling at three point six five and a half. Now, I gotta pull up five percent seventy two, but there, but in other words, the whole thing is going to be delayed a year and a half. And so I think they're probably trying to make a revenue neutral. It's like, well, how can we create some more revenue and that's the goal. After the the non spousal beneficiaries to try to get them to to pull their money out quicker than their lifetime. So you've got twenty four ish trillion dollars in retirement accounts, all sorts of different retirement accounts. Great. But then you have like two thirds of people in their fifties. Dimes that I'm saved. Sure, that's true. Something like that. Right. So, you know, I if you look at the the grand scheme of things, this is really targeted to certain person in person that I believe is have saved money for their own retirement. Yeah. Well with regards to that one issue, but they are trying to make the 4._0._1._K plans easier, and and maybe even cheaper for the smaller business, that's part of it. Yeah. Like, I said before I think, that's the only decent thing obscene. Yeah. That's really the only way to make the retirement more secure everything else is here. Let's move this around. Let's shake the Sultan round in what I mean. I mean, what they say Joe is that the the the stretcher was never really intended for areas to be to go to the next generation over their life or two thousand is when they change the law, right? And before it was always the five year rule. Right. The non spouse beneficiary would have to take it out within five years. And so about twenty years ago, they said all right? Well, here why don't we be able to stretch the overall retirement account taxation over the life expectancy because they were getting concerned that some of these IRA bells were getting way up there, and it would be undue hardship on the beneficiaries. But then now, I mean, I wonder what the average balance or not the average balances what what the the total balance of retirement accounts was back in two thousand when they passed that law, then they're like holy. Yeah. The amount of money. That's in these accounts. That's go after them. I think. Twenty years later, and I are as only started in late seventies eighties. And so it's not like they're generally that I mean in two thousand they weren't that big yet. There were only around thirty years to accumulate some money's the contribution limits back, you know, when they first started was two thousand a few thousand bucks, right? And then as it slowly increased still today, it's what six thousand if you're under fifty seven thousand if you're over fifty so right? Yeah. Anyway, interesting things of what's going on Capitol Hill. So we got some more Email questions in regards to stretch. I raise conversions contributions pro Radha rules and all sorts.

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