-
A traditional retirement account will provide you with a tax benefit in the near term because you do not pay taxes on the contributions into the account. On the other side of the coin, the distributions that you accept are subject to regular income taxes.
Roth account holders pay taxes on the income, and they use part of the remaining income to fund their accounts. Since the taxes are already paid, there are no taxes to remit when distributions are taken.
-
-
You can definitely do this if you have a Roth individual retirement account because there are no required minimum distributions (RMDs). Distributions are mandatory for traditional account holders, so you cannot choose to let the assets accumulate indefinitely.
Why is this the case? The IRS has already gotten their money from Roth account holders, but they want to start collecting something while traditional account holders are still alive.
-
-
This question provides the perfect introduction to the changes that have been, and are being, implemented via legislative mandate. Prior to the enactment of the SECURE Act at the end of 2019, the required minimum distribution age for traditional account holders was 70.5.
A provision in this measure raised the age to 72, and at the time of this writing, another measure called the Securing a Strong Retirement is making its way through the legislative process. This measure is alternately referred to as SECURE Act 2.0.
It was jointly introduced by members of opposing parties, and it has strong bipartisan support. Plus, a similar measure called the Retirement Security & Savings Act has been introduced to the Senate on a bipartisan basis.
A provision in these measures would raise the required minimum distribution age to 75.
-
-
The answer is yes, but this is a relatively new development for traditional account holders because it became possible after the enactment of the SECURE Act. Before it came along, traditional account holders could no longer make contributions after they reached the RMD age.
-
-
SECURE Act 2.0 includes a provision that would require employers to enroll all eligible employees into their retirement savings plans. Employees would have the ability to opt out if they do not want to participate.
There is a savers credit for people in lower tax brackets that contribute into retirement savings plans, and the parameters would be changed to include more taxpayers.
There are many employees that would like to contribute into 401(k) plans, but they cannot spare the income because they make student loan payments. This measure would allow employers to provide 401(k) matches that are tied to student loan payments.
Another change would increase the 401(k) catch-up contributions for older workers to $10,000, but the details are different in the House and Senate bills. In the Senate version, the increase would apply to workers that are 60 years of age and older for the rest of their careers.
The House bill allows the catch-up contribution increase for workers that are between 62 and 64 years of age.
-
-
A non-spouse beneficiary would be required to take mandatory distributions, regardless of the type of account they are inheriting. The distributions would be taxed if it is a traditional account, and Roth account beneficiaries do not pay taxes on the income.
Before the SECURE Act was passed, estate planning attorneys would recommend the “stretch IRA” strategy. The idea was to take only the minimum that was required by law for the maximum length of time to take full advantage of the tax benefits.
Unfortunately, the open-ended stretch is no longer available because the SECURE Act imposed a 10-year limit. All the assets must be taken out of an inherited individual retirement account within 10 years.
-
We Are Here to Help!
Our doors are open if you are ready to work with a Los Angeles estate planning lawyer to put a custom crafted plan in place. You can send us a message to set up a consultation appointment, and we can be reached by phone at 310-337-7696.
