Tuesday, February 7, 2023
Homenew road to retirementDemocrats may change the rules for ‘mega’ IRAs over $5 million

Democrats may change the rules for ‘mega’ IRAs over $5 million

  • Congressional Democrats are weighing a new type of required distribution from individual retirement accounts, based on the account value instead of age, according to a discussion list of policy ideas obtained by CNBC.
  • There are few specifics. It seems owners of "mega" IRA accounts of more than $5 million would be required to withdraw a portion of their funds each year.
  • If it gets enough support, the proposal would be part of legislation to spend up to $3.5 trillion to enhance the U.S. safety net.

MANDEL NGAN | AFP | Getty Images

Democrats may change the rules for "mega" individual retirement accounts with more than $5 million to help fund their expansion of the country's safety net.

"Mega retirement accounts" are among roughly two dozen tax categories congressional Democrats are eyeing to help raise money for a $3.5 trillion spending measure, according to a discussion list obtained by CNBC.

The policy would "require taxpayers to distribute retirement account balances that exceed certain thresholds," according to the list, which is a draft of ideas lawmakers assemble before formally pitching them in the House or Senate.

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Such a rule would essentially function as a new type of required minimum distribution tied to account value instead of age.

The list doesn't specify an exact account threshold, but suggests the limit might be $5 million. (It states that the number of mega IRA accounts with more than $5 million tripled in the past decade, while the average account balance for the middle class is $39,000.)

The policy idea is part of a broader theme of raising taxes on the wealthy to pay for education, climate, paid-leave, childcare and other measures.

It also follows a recent ProPublica report that Peter Thiel, a PayPal co-founder, owns a Roth IRA that grew to $5 billion in 2019, up from less than $2,000 in 1999.

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