Wyden, Neal propose withdrawals on retirement accounts over $10M

Sen. Ron Wyden and Rep. Richard Neal introduced legislation on July 22 that would force withdrawals from tax‑advantaged retirement accounts and block further IRA contributions when an individual’s combined IRA and defined contribution balances exceed $10 million in the prior year.

The proposal applies to taxpayers whose combined retirement balances exceeded $10 million in the prior year. The Joint Committee on Taxation estimates more than 32,000 people held tax‑advantaged retirement accounts above $10 million at the end of 2024 and could be affected.

Under the bill, account holders with total retirement savings above $10 million would have to withdraw at least 50% of the amount by which their balances exceed $10 million. For totals above $20 million, the required withdrawal would be the smaller of the amount needed to reduce the total to $20 million or the aggregate balance held in Roth IRAs and Roth‑designated accounts inside employer plans.

When distributions are required, the bill directs account holders to withdraw first from Roth IRAs and then from Roth accounts inside defined contribution plans. The proposal would also bar new contributions to traditional and Roth IRAs if the individual’s combined balances in IRAs and defined contribution plans exceeded $10 million in the prior year.

The rules would apply only to higher‑income taxpayers: single filers with more than $400,000 in modified adjusted gross income and married couples filing jointly with more than $450,000 in modified adjusted gross income for the prior year.

Current law already imposes a 6% excise tax on excess retirement contributions. The bill would expand that excise tax to cover the new contribution limits created by the measure.

Wyden described the intent behind the proposal by saying, “Tax‑preferred retirement accounts are not supposed to be a loophole for the ultra‑rich to shelter immense fortunes,” and called retirement accounts “a lifeline for working Americans who may not otherwise have a dignified retirement.” Neal added, “Allowing a handful of individuals to accumulate staggering fortunes while still receiving taxpayer subsidies was never what Congress intended.”

Financial advisers say the proposal could prompt changes in retirement and estate planning. David W. Demming, founder and president of Demming Financial Services in Aurora, Ohio, noted that limiting contributions may be cleaner than forcing distributions and that large balances can come from investment gains or option strategies rather than excess contributions. He also said the bill could affect plans to leave IRA balances to heirs or charities and recommended Roth accounts for clients seeking tax‑free withdrawals in retirement.

The bill will proceed through committee and could be amended before any floor vote. If enacted, the rules would alter how advisers manage rollovers, Roth conversions and legacy planning for clients with unusually large retirement account balances.