Bill Would Force Payouts on $10M+ Retirement Accounts

Sen. Ron Wyden and Rep. Richard Neal introduced legislation on July 22 that would require distributions from tax-advantaged retirement accounts once balances exceed $10 million and would prohibit additional IRA contributions for certain high earners. The bill was filed in the Senate by Finance Committee Ranking Member Ron Wyden and in the House by Ways and Means Committee Ranking Member Richard Neal.

The proposal applies to taxpayers whose prior-year modified adjusted gross income exceeded $400,000 for single filers and $450,000 for married couples filing jointly. For individuals with total retirement account balances above $10 million, the bill would require a minimum distribution equal to 50% of the amount over $10 million.

For total balances above $20 million, the required distribution would be the smaller of two amounts: the sum needed to bring aggregate account balances down to $20 million, or the combined balance held in Roth IRAs and Roth-designated accounts in employer plans. Required distributions would be taken first from Roth IRAs and then from Roth-designated accounts in defined contribution plans. The bill would also extend the existing 6% excise tax on excess contributions to cover the newly limited IRA contributions.

The Joint Committee on Taxation reported that more than 32,000 taxpayers held tax-advantaged retirement accounts with balances over $10 million at the end of 2024.

Wyden wrote, “Tax-preferred retirement accounts are not supposed to be a loophole for the ultra-rich to shelter immense fortunes, they’re a lifeline for working Americans who may not otherwise have a dignified retirement.” Neal stated, “Allowing a handful of individuals to accumulate staggering fortunes while still receiving taxpayer subsidies was never what Congress intended.”

Financial advisers said the proposal could affect planning for clients with large account balances. David W. Demming, founder of Demming Financial Services, preferred limiting contributions rather than forcing distributions and noted large balances can result from market gains or option strategies. He recommended Roth conversions for clients who can pay conversion taxes now and observed, “One of the great lies in America is when you retire … your tax bracket will be lower.”