Earlier this year, the House of Representatives overwhelmingly passed the SECURE Act--the vote was 417-3 in favor. The legislation is aimed at increasing retirement investments by encouraging more businesses to offer retirement plans and giving employees more options for investing retirement account funds. The strong Congressional support for the bill comes as more Americans are looking to save and invest for retirement. But the bill also includes some lesser-known provisions that directly impact those with Roth IRAs. "This new rule (in the SECURE Act) is going to limit the amount of time a Roth IRA beneficiary who is not a spouse has to pull the money out of the Roth IRA," says Randy Reimer, Houston-based CPA. "The only people it's really hitting are those people that inherit a Roth IRA that are not the spouse."
Specifically, the SECURE Act would require all money in a non-spouse inherited Roth IRA to be withdrawn within ten years. Under current law, the money can be withdrawn over the estimated life expectancy of the beneficiary. Reimer tells KTRH this would cost younger beneficiaries who inherit accounts from older relatives. "If you've got some high-growth stocks sitting in a Roth, the more time you've got to leave them in the Roth, the more money it's going to make, tax-free," he says. "A lot of people are putting a lot of money into their Roths, and what (this legislation) is saying now is if that money is inherited by someone who is not your spouse, they will have to pull the money out of the Roth within ten years."
The SECURE Act also contains provisions that are positive for taxpayers, like allowing contributions to IRAs after age 70 1/2, which is currently not allowed. It also raises the age that people must begin taking required minimum distributions from IRAs from 70 to 72.
The bill is still pending in the Senate, where Texas Sen. Ted Cruz objected to a provision that would limit the use of funds in college savings accounts.