Death of the Stretch IRA & the MEGA Backdoor Roth

 

In Episode 4, I review a few articles about clarifications to the SECURE Acts new 10-year Rule for Non-Designated Beneficiaries and a new bill discussing the SECURE Act 2.0. After that, we’ll address how to use the Spillover Election to help you make a MEGA Backdoor Roth Contribution while still getting a tax deferral on your Elective Deferral.

The new 10-year rule ended the ability for many people to do a Stretch IRA, meaning instead of being able to defer the taxes on inherited retirement assets, you now only have 10 years over your lifetime. It isn’t a big deal if you plan to spend all the money, but for savers who would take minimum distributions over their lifetime. The change is forcing them to pay taxes sooner rather than later.

The SECURE Act 2.0 has been proposed and passed through the House Weighs and Means Committee unanimously. It is far from being a law, but the provision raising the age to start Required Minimum Distributions from Retirement Accounts to 75 is likely to be popular.

Finally, Backdoor Roth IRA Contributions are great if you can do them. There is a catch you need to make sure you understand so you don’t get a surprise at tax time. If you are subject to that catch or just want to save more and not have to jump through a lot of hoops, the MEGA Backdoor Roth contributions through your 401(k), can make your life easier.

As a PG&E Retirement Specialist, I help people maximize their 401(k) contributions before tax and after tax. Whether you are just starting out at PG&E or you are ready to retire, understanding the ins and out’s of the PG&E 401(k) can give you a leg up on saving for retirement.