[FOX Business] A retirement reform bill is advancing through Congress, which includes some positive provisions for workers ‐ but at least one big downside that could hurt wealthier retirees.The legislation ‐ known as the SECURE Act ‐ cleared the House of Representatives in May, and is awaiting Senate approval. Among its more well-known provisions are: increasing access to retirement plans, extending the age limit by which people would be allowed to stash money into IRA accounts and delaying when people would be required to take required minimum distributions to 72, from 70 1/2.
As previously noted by FOX Business, there is at least one measure that could seriously impact retirees and their savings. That is the potential elimination of stretch IRAs.
The new proposal stipulates that most non-spouses who inherit an account must drain it within 10 years of the owner’s death, while the current law allows them to stretch it out over a lifetime.
Stretch IRAs are an estate planning strategy ‐ a way that people can pass on their retirement funds to their kids, grandkids or other beneficiaries. For a child, for example, the funds (under current law) can grow tax-deferred or tax-free over the course of his or her lifetime, while taking smaller required minimum distributions along the way (based on age and life expectancy). Those distributions, however, are subject to income taxes.