My Take: Obama Budget Proposal Shines Light on Estate Tax and Retirement Planning — Brian Zdrowak
Brian Zdrowak, Dopkins Wealth Management, Buffalo, N.Y.
President Barack Obama’s 2014 budget proposal, which includes making changes to individual retirement accounts (IRAs) and estate tax exemptions, has been making headlines.
In the abridged version, the draft introduces:
- A cap on IRAs based on an annual retirement income of $205,000. Once this limit is reached, an investor will be unable to contribute to any type of IRA or 401(k).
- Stretch IRAs for non-spousal beneficiaries would be eliminated and replaced with a maximum five-year withdrawal period.
- The estate tax exemption made permanent in the fiscal cliff deal would be reduced to $3.5 million from the current $5.25 million.
- The estate tax would be increased from 35 percent to 40 percent.
- The estate tax exemption amount would cease to be indexed to inflation.
A draft budget is just that — a draft. IRAs and estate taxes are constantly subject to modification from a variety of angles — budgets and otherwise. These are just the latest, and although they may not survive intact, they could portend change.
Therein lies the real message: Estate and retirement planning is not a “one-and-done” proposition. The question to ask is: When was the last time you evaluated your estate and retirement plans to make sure they still address your personal financial goals? Whether or not laws change, your life does and your plans should change with it — not with every market swing, but with significant life and tax changes.
A budget proposal is a collection of what-ifs, many of which will never come into existence in their present form. They say the devil is in the details, and while we would not suggest acting on the proposed budget, we continue to suggest that investors stay tuned for future conversations in Washington.
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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.
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