I know, I know, everyone is tired of talking about the Presidential election, but I wanted to say just a few quick words about the potential impact of the new administration (and congress), as those changes relate specifically to self-directed IRAs. As some of you might be aware, Senator Ron Wyden (D-Oregon; current Ranking Member of the Senate Finance Committee) presented some proposed legislation on September 8, 2016 (entitled “The Retirement Improvements and Savings Enhancements (RISE) Act of 2016”), which if passed, would profoundly affect Roth IRAs, inherited IRAs, and any IRA that holds “non-traditional” assets. Among other things, the legislation would eliminate Roth contributions, force distributions out of Roth IRAs during the accountholder’s life, eliminate favorable “stretch” treatment to IRA beneficiaries, and cap Roth IRAs values at $5 million. Also, the most extreme version of the legislation would require that all non-traditional assets (e.g., real estate, private equity, etc.) purchased by a retirement account would need to get appraised before being purchased. This would essentially force retirement accounts to always pay “fair market value”, which is completely counter to the Tax Code’s definition of fair market value which is the value that is agreed upon when assets are sold between two unrelated people – i.e., a willing buyer and willing seller. Effectively, this provision would force all retirement accounts to invest into only publicly-traded assets – thereby affecting at least $1 trillion of retirement funds. Here is a link to my blog post in which I have a verbatim email I wrote to Senator Wyden critiquing the legislation(on technical, not political, grounds).
With Republicans now having control over the legislative and execute branches it is even more likely that Senator Wyden’s rather radical ideas with regards to Roth IRAs and non-traditional IRA investments will not become law. However, I do believe that federal legislators will continue to sharpen their focus on retirement accounts going forward. After all, the most recent statistical data shows that the total value of all US retirements assets is now $24.5 trillion, a historical record.