Lawmakers may kill this popular retirement tax break for the wealthy.
Assets held in an inherited retirement account would have a shorter amount of time to grow on a tax-deferred basis, meaning overall account size would be smaller in most cases. Withdrawals will also be larger, since they're compressed into a shorter frame of time, making it more likely that beneficiaries of a pre-tax account will be pushed into a higher income-tax bracket when they take distributions.
Significantly, individuals affected by this change in tax law only have a short time to amend their financial plans. Taxpayers who inherit a retirement account from an account owner who dies after Dec. 31, 2019 would be subject to the new distribution rules. Accounts of those who die before the end of the year would be subject to the old distribution rules.
The stretch IRA doesn't necessarily apply only to wealthy Americans, Levine said. It could apply to those who've saved diligently over several decades and have relied primarily on Social Security and other retirement assets such as a pension for retirement income.
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