There Are Three Retirement Loopholes That Are Probably Going Away

People use a number of tricks and tips to grow retirement benefits and bypass certain taxes.  As these tricks or “loopholes” become more common the government may end up cracking down on some of them.  Here are three retirement loopholes that the government may get rid of in the near future:

1. Back-door Roth IRA Conversions.  President Obama has made a 2016 budget proposal that effectively calls for eliminating the back-door Roth IRA Conversions.  Gridlock in congress may keep this estate planning technique in place for the indefinite future, though there is a push to get rid of it.
2. The Stretch IRA.  People who inherit an IRA have the option of taking distributions over their lifetimes, providing decades of tax free income.  There are a growing number of lawmakers who would like to get rid of the “stretch” and require non-spouse beneficiaries to withdraw the IRA money within five years.
3. Aggressive Social Security Strategies.  The Obama budget has also proposed doing away with some of the “aggressive” social security techniques like “file and suspend” or “claim now, claim more later.”

See Liz Weston, Three retirement loopholes seen likely to close, Reuters, June 29, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.