This area of the tax code where 401k and IRA money sits has a target on it. Due to the heavy marketing of these plans as “retirement plans” working class Americans with financial assets hold nearly 90 percent of their liquid savings there.
Roth Proposed Changes
The president has proposed to force Roth IRA holders to take money out of these accounts at age 70 1/2. This completely negates the long term wealth opportunity presented to taxpayers when the Roth was created. Furthermore, upon death when the money passes to non spousal heirs, the money must be distributed in 5 years.
This Is Not The First Attack
In previous tax bills, the congressional representatives have made attempts to change the tax laws on IRA and 401k plans. Most recently congress proposed the elimination of the stretch IRA in a transportation and highway bill. Because dead men don’t talk, these accounts will continually be targets.
Interestingly, there is approximately 17 trillion dollars in all tax deferred retirement plans in America. That number is nearly the same as the debt the Federal Government owes.