How Proposed IRA Changes Could Hurt Your Family's Future
IRAs were designed to help people fund their retirement, but with many retirees not using up their retirement account balances before they die, IRAs also serve a useful purpose in passing wealth to future generations. Now, though, proposals in President Obama's new budget would greatly change the way inherited IRAs work.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at how changes to inherited IRA rules would make them far less desirable for estate-planning purposes. Dan notes that the proposal doesn't change current rules allowing spouses to roll over inherited IRAs to IRAs in their own name. But the real changes apply to heirs other than spouses. Dan points out that under current law, many beneficiaries can use what's known as a stretch IRA to take distributions over the course of their lifetimes, minimizing the tax impact and maximizing tax deferral. But the budget would change those rules, instead forcing most non-spouse beneficiaries to withdraw the full balance of inherited IRAs within five years of the original owner's death. Dan concludes that such rules accelerate taxation and discourages using inherited IRAs for one's own retirement.
Put together a better picture of your retirement finances
IRAs are essential to your financial security in retirement, but you also need to pay attention to your Social Security benefits. In our brand-new free report, "Make Social Security Work Harder for You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.
The article How Proposed IRA Changes Could Hurt Your Family's Future originally appeared on Fool.com.Dan Caplinger doesn't own shares of any companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.