Goodbye to the backdoor Roth IRA?

The White House has a long list of ideas for both streamlining and improving our retirement savings system, but so far we haven’t heard much about the changes outlined in President Obama’s 2017 budget. Perhaps that’s no surprise, considering that we’re in the midst of a raucous, chaotic presidential election campaign and Congress is deadlocked on just about everything.

But the changes outlined by the administration merit a closer look, because the ideas contained in the budget give us insight into what mainstream policy experts are thinking—and these ideas sometimes pop up in legislation. Consider the recent clampdown on the restricted application and file-and-suspend loophole for Social Security claimants. That was first proposed in the President’s fiscal 2015 budget, then was enacted on short notice as part of the negotiations that produced the Bipartisan Budget Act last November.

This year, the White House proposed a laundry list of retirement policy changes, some of which have appeared in earlier budget plans. Included are a renewed call for a national auto-IRA, expanded penalty-free retirement account withdrawals for the long-term unemployed, tightened rules for stretch IRAs, and the creation of multiple employer-defined contribution plans for small businesses.

The list also repeals Net Unrealized Appreciation in employer securities (NUA), eliminates stretch IRAs for non-spouse beneficiaries and limits IRA contributions for savers with combined retirement accounts valued over $3.4 million.

In my column this month, I review some of the proposals that would have significant impact on retirement savers: a clampdown on backdoor Roth contributions, harmonization of required minimum distributions (RMDs) and elimination of RMDs for smaller accounts.

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