New retirement laws begin to address the country's retirement savings shortfall, but those who inherit IRAs will have to scramble
Widely quoted estimates suggest that these provisions will increase the pool of retirement savings some $1.0 trillion, reducing the present shortfall by more than one quarter, not a complete answer, to be sure, but a good start. The law includes other provisions to help older Americans better use what savings they have. They for one will allow people to continue contributing to their IRAs after age 70.
There are problems, however. Annuities, to be sure, can offer greater payouts for longer than most savings plans because on the death of the beneficiary the insurer keeps what principal is left. But several 401 administrators say that they will balk at annuities, claiming that the fees involved eat up much of the benefits.
Under the old law, such heirs, no matter how old, could gradually draw on these funds over their lifetime, paying taxes only on what they took out each year and enjoying tax-free gains on what they left invested. Under the new law, these heirs must drain the accounts within ten years. There are exceptions. The old rules still apply to surviving spouses and those who are disabled or chronically ill.
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