New York, NY (PRWEB) July 19, 2013
MoneyMermaid.com is alerting consumers that Congress may soon be capping stretch IRAs in order to pay for lower student loan interest rates. This could cause investors, especially wealthy ones, to change how their inheritances are structured going forward. MoneyMermaid.com believes that this could also change how heirs approach their own financial planning through areas such as debt consolidation. MoneyMermaid.com suggests that people figure out how they will deal with this change now so that they are not hit with large bills later.
The Forbes article “4 Steps To Take Now That Stretch IRAs Are Endangered” (published July 11) noted that in order to fund the student loan interest rate reduction, the United States Senate moved to eliminate stretch IRAs, using the tax dollars that generated by the elimination to pay for the lower rates on federally subsidized Stafford student loans.
Stretch IRA reduction, and even elimination, has been discussed before. As noted in the aforementioned article, Finance Committee Chairman Max Baucus (D Montana) discussed it last year, President Obama included it in his budget proposals, and the American Bar Association mentioned it in a tax simplification proposal.
Financial planners can assist in setting up personal finance plans, both short and long-term. With stretch IRAs being taken off the table, the appeal of converting to a Roth IRA may be diminished for some people, as they will have to pay the taxes upfront.
While the disappearance of stretch IRAS will likely affect the wealthy, those who are in the middle class should also take this time to review their financial status as it pertains to inheritance. Spouses are often the primary beneficiaries on accounts; by making children or grandchildren contingent beneficiaries the surviving spouse can determine if he/she is in need or that money or if it should pass on to the contingent beneficiaries.
The loss of stretch IRAs may also affect charitable giving but in a positive manner. While individuals can be taxed on inheritances from IRAs, charities enjoy tax-free status. Therefore, an increase in charitable giving through wills could increase.
MoneyMermaid.com suggests that people who are looking to set aside money for discuss their option with a financial planner. With the popular stretch IRAs looking as though they will become a thing of the past, tax-free shelters for inheritances are dwindling.
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MoneyMermaid.com focuses on helping people gain financial independence by becoming debt free. MoneyMermaid.com keeps people abreast of news surrounding investments, debt reduction, tax changes and tips on increasing their household income while decreasing household spending.
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