12-31-2019, 10:28 PM
I wasn’t clear enough on this issue in my OP. The reduction in the time frame for receiving distributions is disappointing to me, but it’s not necessarily unfair. Many have made the point that the IRA was never intended to be a way to perpetuate wealth over generations.
However, I think it is unfair to pass a last minute law that changes the rules that people have relied upon for years to plan their IRAs. It seems to me that that it would have been more fair to grandfather in those who planned in previous years.
I’m sorry to sound like an entitled boomer when so many people are having a tough time saving for their retirement. However, I think practical effect of this act is going to hurt millennials who inherit a Traditional IRA the most. This is because traditional IRA beneficiaries will be forced to take their money in a shorter time period than previously, thus creating more income per year. This will likely force them into a higher tax bracket each year during the 10 year period. A longer distribution period allows beneficiaries to take smaller amounts over more years and incur less total taxes. In short, it’s better to take inherited IRA distributions over a longer time period than a shorter one.
EDIT: thanks, Michael - your explanation is clearer and more concise than mine. Hello Roth!
However, I think it is unfair to pass a last minute law that changes the rules that people have relied upon for years to plan their IRAs. It seems to me that that it would have been more fair to grandfather in those who planned in previous years.
I’m sorry to sound like an entitled boomer when so many people are having a tough time saving for their retirement. However, I think practical effect of this act is going to hurt millennials who inherit a Traditional IRA the most. This is because traditional IRA beneficiaries will be forced to take their money in a shorter time period than previously, thus creating more income per year. This will likely force them into a higher tax bracket each year during the 10 year period. A longer distribution period allows beneficiaries to take smaller amounts over more years and incur less total taxes. In short, it’s better to take inherited IRA distributions over a longer time period than a shorter one.
EDIT: thanks, Michael - your explanation is clearer and more concise than mine. Hello Roth!