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Press Release Index
November 8, 2002
Press Release from:
Ed Slott, CPA
Publisher, Ed Slott's IRA Advisor
Rockville Centre, NY
516-536-8282
Election Results May Prove IRA Friendly
Good news may be on the horizon for IRA owners. Many of the
past proposals may now stand a good chance of becoming law.
If they do, or even if some of them do, there would be a
major shift in IRA planning.
Former retirement plan proposals that could now become law:
- Raising the age when required distributions must begin to 75 from 70 ½
- Exempting the first $300,000 of retirement account funds
from required distributions
- Allowing rollovers for non-spouse beneficiaries. Current
law does not allow this.
- Increasing IRA and plan contribution limits
- IRAs could be gifted to a charity tax-free. Under current
law, if you wanted to give your IRA to a charity during
your lifetime, you would first have to withdraw the amount
you want to give, pay the income tax and then give what's
left to the charity. You'd receive a tax deduction, but
you also paid the income tax. Under this proposal, you
would be able to gift the IRA directly to the charity and
not pay any income tax on the withdrawal. You would also
not receive a tax deduction since you did not pay the tax
on the withdrawal.
IRAs would quickly morph from retirement accounts into
estate planning vehicles. Although this was never the
intended purpose of saving for retirement, that may be
the case soon.
Who stands to benefit most?
People with lots of cash in their IRAs or people with lots
of non-IRA money.
People with large IRA accounts will be able to leave more
to their beneficiaries than under existing rules, because
they could delay distributions until age 75 and exempt
$300,000 from required distributions altogether. People
with an abundance of non-IRA funds will also be able to
leave more IRA money to beneficiaries because they won't
need to withdraw from IRAs. They could use their non-IRA
money to live on and take advantage of delaying required
distributions until age 75.
Non-spouse beneficiaries will also benefit. They will no
longer lose the ability to stretch required distributions
from their inherited accounts simply because they
inherited from a 401(k) plan instead of from an IRA.
People who are charitably inclined and want to give their
IRA to a charity during their lifetime rather than having
to leave it to the charity at death will benefit. The
benefit is that the donors can now be able to see their
gifts do some good.
Who won't benefit?
Those who need their IRAs to live on won't benefit.
Raising the age to 75 won't help someone who needs to
withdraw from their IRA maybe even before 70 ½ years old.
Likewise, exempting any amount from required distributions
won't help those who need to withdraw to live on.
Those who cannot afford to contribute the maximum amount
to their IRAs won't benefit.
This was true with the last increase in annual contribution
limits from $2,000 to $3,000. Many people could not afford
to contribute $2,000 so raising the contribution amount to
$3,000 is of no help to these people, but it could provide
an incentive to save more for retirement.
Estate Tax Repeal
When you add a possible repeal of the estate tax to the
above mix, it amplifies the benefits of leaving more IRA
funds to beneficiaries who can inherit them estate tax free.
The Bottom Line…
These proposals are terrific for those who can afford to
take advantage of them, but they will have a huge price
tag. Last summer The Wall Street Journal reported that the
cost of the age 75 proposal alone would be $41 billion over
10 years. The other proposals including the estate tax
repeal would easily cost tens of billions more. These
provisions would blow a hole in the already bloated budget
deficit. That may mean new taxes somewhere else. So who
will pay for it? Probably the same people who cannot
afford to take advantage of these provisions. The
government could always cut expenditures, but that never
happens. It is more likely that the Boston Red Sox will
win the World Series before our government ever tightened
its belt. Sorry Boston fans. I guess I should disclose my
conflict of interest. I'm a NY Mets fan! They stink too.
Ed Slott, CPA
Publisher, Ed Slott's IRA Advisor
100 Merrick Road - Suite 200 East
Rockville Centre, New York 11570
(516) 536-8282
email: slottcpa@aol.com
website: http://www.irahelp.com
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