Could Large Retirement Accounts Face Forced Distributions? What IRA Investors Should Know
Retirement accounts are designed to encourage Americans to save and invest for the future. But what happens when an IRA or 401(k) grows to tens—or even hundreds—of millions of dollars?
That question is once again attracting attention in Washington.
According to a July 2026 report by The Wall Street Journal, Sen. Ron Wyden and Rep. Richard Neal plan to introduce legislation that could require certain high-income individuals with more than $10 million in combined retirement accounts to take annual distributions—even if they have not reached the normal required minimum distribution age.
The proposal is aimed primarily at extremely large retirement accounts, including accounts that grew substantially after investing in early-stage private companies.
For most retirement savers, nothing has changed. The proposal is not currently law, and it would apply only to taxpayers who meet both an income threshold and a retirement-account balance threshold.
Still, investors with significant alternative assets should understand the discussion and monitor future developments.
What is being proposed?
As reported, the proposed legislation would apply to taxpayers who meet both of the following conditions:
- Individual income above $400,000, or married-filing-jointly income above $450,000
- Aggregate IRA and defined-contribution retirement-plan balances exceeding $10 million
Under the proposal, an affected taxpayer would generally be required to withdraw 50% of the amount exceeding $10 million each year.
For example, consider an eligible taxpayer with $14 million across IRAs and defined-contribution plans. The account balance exceeds the proposed $10 million threshold by $4 million. Under the reported formula, the taxpayer could be required to distribute $2 million during the year.
The proposal would also contain a more aggressive rule for balances above $20 million. According to the report, amounts exceeding $20 million would first be required to come out of Roth accounts.
These details are based on the reported proposal. Final legislative language, if introduced, could differ.
Is this rule currently in effect?
No.
As of this writing, there is no existing federal rule requiring retirement-account owners to take distributions solely because their combined balances exceed $10 million.
Current required minimum distribution rules generally depend on factors such as:
- The account owner’s age
- The type of retirement account
- Whether the account is inherited
- The relationship between an inherited-account beneficiary and the original owner
The proposed large-account distribution rule would create a different type of requirement based on income and total retirement-plan balances.
Until Congress passes legislation and it is signed into law, existing retirement-account rules remain in place.
Why are lawmakers focusing on large retirement accounts?
Lawmakers have periodically questioned whether tax-advantaged retirement accounts should be permitted to grow without an upper limit.
The latest attention follows reports of entrepreneurs, venture-capital professionals and corporate insiders acquiring early-stage private-company shares in retirement accounts at relatively low initial values. When those companies later became highly successful, some retirement accounts grew to eight-, nine- or even ten-figure balances.
The Joint Committee on Taxation reportedly found that:
- More than 1,000 people had at least $25 million in IRAs in 2024
- Approximately 11,600 people had IRA balances of at least $10 million
- Around 200 people had at least $100 million when IRAs and 401(k)-type accounts were combined
Among IRA owners with balances exceeding $25 million, approximately 56% of the assets were held in Roth accounts at the end of 2024.
Supporters of additional restrictions argue that retirement accounts were intended to support retirement security, not to shelter extremely large fortunes from taxation.
Opponents may argue that investors followed the same retirement-account rules available to other taxpayers and should not be penalized simply because an investment performed exceptionally well.
That policy debate is likely to continue.
How can an IRA grow to such a large balance?
A large IRA does not necessarily result from making contributions above the annual limit.
An investor may purchase an asset within an IRA when the asset has a relatively low, properly supported fair market value. If the investment later appreciates dramatically, the gains generally remain within the retirement account.
For example, an IRA might invest in:
- An early-stage private company
- A private-equity or venture-capital fund
- Real estate
- A private lending opportunity
- A limited liability company
- Another permissible alternative asset
When an investment grows inside a traditional IRA, taxes are generally deferred until distributions are taken. When a qualified investment grows inside a Roth IRA, qualified distributions may be tax-free.
This tax-advantaged compounding is one of the primary benefits of retirement investing. However, significant growth does not eliminate the investor’s responsibility to follow the rules.
A large balance does not automatically mean wrongdoing
It is important to distinguish between a highly successful investment and an improperly structured transaction.
An IRA can legitimately purchase an early-stage investment at a low value when that value reflects a reasonable and supportable fair market value at the time of purchase.
The fact that an investment later becomes highly valuable does not, by itself, mean that the original valuation was improper.
Questions may arise, however, when:
- An investment was intentionally undervalued
- The IRA owner controlled the company whose shares the IRA purchased
- The transaction involved a disqualified person
- The IRA owner received a personal benefit from the investment
- The investment was not acquired on arm’s-length terms
- Required annual valuations were not properly completed
- Personal and IRA funds or assets were commingled
These issues can be particularly important with private-company stock and other illiquid investments.
Why accurate valuation matters
Publicly traded assets generally have readily available market prices. Private investments can be more difficult to value because they are not traded on an established exchange.
An early-stage company may have limited revenue, uncertain prospects and different classes of ownership interests. Its value may also change substantially between funding rounds.
That makes proper documentation especially important.
Depending on the investment and the circumstances, supporting information might include:
- Independent appraisals
- Recent arm’s-length financing transactions
- Capitalization tables
- Company financial statements
- Third-party valuation reports
- Offering documents
- Recent comparable transactions
- A qualified independent valuation
IRA owners should not select an artificially low value simply to fit a larger ownership interest within the IRA’s available cash.
Annual fair market valuations may also be required for privately held or illiquid IRA assets. The retirement-account custodian or administrator generally relies on the account owner or an appropriate independent party to provide current valuation information.
Prohibited transactions remain a major concern
The proposed forced-distribution rule is separate from the existing prohibited-transaction rules.
An IRA owner cannot use an IRA to transact with certain disqualified persons or to obtain an impermissible personal benefit. Disqualified persons may include the IRA owner, the IRA owner’s spouse, lineal family members and certain entities those individuals own or control.
For example, serious issues could arise if an IRA owner:
- Causes the IRA to purchase an asset from the owner personally
- Uses IRA-owned property for personal purposes
- Pays IRA expenses with personal funds
- Uses IRA assets to benefit a disqualified person
- Personally guarantees debt owed by the IRA
- Causes the IRA to invest in a business in a manner that improperly benefits the owner
A prohibited transaction can have severe tax consequences, potentially including the loss of the account’s IRA status.
Investors considering private-company investments should consult qualified legal, tax and investment professionals before proceeding.
What could forced distributions mean for illiquid assets?
One practical concern is that many very large retirement accounts may hold investments that cannot be easily converted to cash.
An IRA holding publicly traded securities may be able to sell enough assets to satisfy a required distribution. An IRA holding private stock, closely held business interests or real estate may face additional challenges.
Possible issues could include:
Limited liquidity
The IRA may not have sufficient cash to make the required distribution without selling an asset.
Difficulty finding a buyer
Private-company shares, private funds and closely held investments may be subject to transfer restrictions or may have no readily available market.
In-kind distributions
In some circumstances, a retirement account may distribute an asset rather than cash. An in-kind distribution generally requires an accurate fair market value, and the taxable amount may be based on that value.
Tax obligations
A distribution from a traditional retirement account is generally taxable. A large mandatory distribution could create a significant tax bill.
Qualified Roth IRA distributions are generally tax-free under current law, but the proposed legislation reportedly includes special rules directing certain excess balances to be distributed from Roth accounts first.
Transaction timing
Selling or distributing illiquid assets may take time. Investors could need to plan well in advance rather than waiting until the end of the year.
These implementation questions would need to be addressed in the final legislation or subsequent regulatory guidance.
Would the proposal apply to all IRA owners with more than $10 million?
Based on the reported framework, no.
The proposal would reportedly apply only when both the applicable income threshold and retirement-account balance threshold are exceeded.
An individual with more than $10 million in retirement accounts but income below the specified threshold may not be subject to the proposed rule, depending on the final legislative language.
Similarly, a high-income taxpayer whose combined retirement balances are below $10 million would not meet the reported account-balance threshold.
Investors should avoid relying on headlines that simply say all retirement accounts above $10 million would face mandatory distributions. The proposal appears to be more narrowly targeted.
What should self-directed IRA investors do now?
There is no reason to make an immediate transaction solely because a bill has been discussed or introduced.
However, investors with substantial private or alternative assets may want to take several prudent steps:
Keep valuations current
Make sure illiquid assets are valued as required and that the valuation is supported by appropriate documentation.
Review investment structure
Work with qualified counsel to confirm that investments do not involve prohibited transactions, self-dealing or impermissible benefits to disqualified persons.
Maintain sufficient liquidity
Consider whether the account holds enough cash to pay fees, expenses, taxes or potential future distributions without forcing an asset sale at an unfavorable time.
Organize account records
Retain subscription agreements, purchase documents, appraisals, valuation reports, capital statements and other evidence supporting the investment and its value.
Monitor legislative developments
The proposed thresholds, income limits, distribution formula and effective date could change during the legislative process.
Consult qualified advisers
An IRA administrator processes instructions and maintains retirement-account records. It does not provide investment, tax or legal advice. Investors should discuss the potential effect of any new law with their CPA, attorney or financial professional.
What this proposal does not change
The current discussion should not obscure an important point: self-directed IRAs remain a powerful way for investors to diversify retirement savings beyond conventional publicly traded assets.
Depending on the account structure and investment, a self-directed IRA may hold assets such as:
- Real estate
- Private equity
- Private-company stock
- Promissory notes
- Private lending investments
- Precious metals
- Certain cryptocurrency investments
- Limited partnerships
- Other permissible alternative assets
The responsibility that comes with this flexibility remains the same. The account holder must conduct due diligence, understand the investment, avoid prohibited transactions and obtain qualified guidance when needed.
A successful investment should be celebrated. It should also be documented and structured correctly from the beginning.
Frequently Asked Questions
Is Congress forcing people to withdraw money from IRAs over $10 million?
Not currently. Lawmakers are reportedly proposing legislation that could require certain high-income taxpayers with more than $10 million in combined retirement accounts to take annual distributions. The proposal has not become law.
Would the proposed rule apply to Roth IRAs?
Yes, Roth IRA balances would reportedly be included when determining whether a taxpayer exceeds the aggregate retirement-account threshold. The proposal would also require certain amounts above $20 million to be distributed from Roth accounts first.
Would someone have to withdraw the entire amount over $10 million?
Under the reported proposal, an affected taxpayer would generally withdraw 50% of the amount exceeding $10 million annually. A different rule would reportedly apply to balances above $20 million.
Would the rule apply regardless of age?
The proposal would reportedly apply to qualifying taxpayers of any age. That would differ from traditional required minimum distribution rules, which generally depend on the account owner’s age or inherited-account status.
Are large IRA balances illegal?
No. A retirement account can grow substantially when an investment appreciates. A large balance alone does not establish that the account owner violated any law.
Can a self-directed IRA invest in startup companies?
A self-directed IRA can generally invest in eligible private-company opportunities. However, the transaction must comply with prohibited-transaction rules, valuation requirements and other applicable laws. The investment must not improperly benefit the account owner or another disqualified person.
Can a company founder use an IRA to buy shares in the founder’s company?
This can present significant prohibited-transaction, control, valuation and self-dealing concerns. Anyone considering such a transaction should obtain advice from an attorney or tax professional experienced in retirement-account law before investing.
How are private-company shares valued inside an IRA?
The appropriate valuation method depends on the investment. It may require company financial information, recent arm’s-length transactions, an independent appraisal or another qualified valuation method. The valuation should be supportable and properly documented.
What happens when an IRA must distribute an illiquid asset?
The account may need to sell the asset, generate liquidity from another source within the IRA or potentially make an in-kind distribution. An in-kind distribution requires a supportable value and may create taxable income when distributed from a tax-deferred account.
Should investors withdraw funds now in anticipation of the proposal?
Investors should not take action solely because legislation has been proposed. Premature distributions may create taxes and, in some cases, early-distribution penalties. Investors should monitor the legislation and consult their tax or legal advisers before making decisions.
Does uDirect IRA Services recommend investments?
No. uDirect IRA Services is a self-directed IRA administrator. We do not recommend, endorse or evaluate investments, and we do not provide tax, investment or legal advice. Account holders are responsible for conducting their own due diligence and consulting qualified professionals.
The bottom line
Certain high-income taxpayers with exceptionally large retirement accounts may face mandatory distributions if the reported proposal becomes law.
For now, it remains a proposal—not a change to current IRA rules.
The larger lesson for self-directed IRA investors is not to fear investment success. It is to make sure every investment is properly structured, appropriately valued and fully documented.
Whether an IRA holds $100,000 or $100 million, compliance matters.
About uDirect IRA Services
uDirect IRA Services helps investors use self-directed IRAs to invest in alternative assets, including real estate, private placements, private lending and other permissible investments. Our team provides education and administrative support so account holders can better understand the process of opening, funding and investing through a self-directed retirement account.
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Disclaimer:
This article is provided for educational purposes only and is based on information available as of July 2026. Proposed legislation may change and may not become law. uDirect IRA Services does not provide tax, legal or investment advice and does not endorse or evaluate investments. Consult a qualified tax adviser, attorney or financial professional regarding your specific circumstances.