Bill proposed to crack down on backdoor roth (and other loopholes)

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Biden was just live talking about how he supports taxing unrealized gains. I guess this is their whole plan laid out. Eliminate tax advantaged accounts and then tax any unrealized earnings so there is nowhere left to accrue wealth.

It would only be taxing the unrealized gains of billionaires. Biden threw his support for it and Wyden has been working on it for a few years.

But who knows if such a "wealth tax" would even be constitutional. It's a concept I support in theory, but the practicalities seem sort of crazy:

https://www.wsj.com/articles/biden-expresses-support-forannual-tax-on-billionaires-unrealized-gains-11632498487

Taxing productive people is stupid and makes us all worse off. Raise the estate tax and close the loopholes and cut income taxes. Going after people like Peter Thiel while they are alive is self-indulgent but counter productive. Let them produce and spend whatever they want while they're alive, and take most of it back upon their death to keep it from unproductive heirs.

I kind of agree with this - but I also don't think that Theil (or anyone) should have a massive massive IRA and b e able to dodge massive amounts of taxes by using it, which get a special tax treatment designed to support an average person in retirement. It is a loophole, so close it.

Theil exploited a Roth IRA conversion loophole. Taxing unrealized gains does nothing to address what he did.

Fixing my quoting error, sorry.

No, but this thread isn't (wasn't) about taxing unrealized gains (which I don't support and isn't part of this bill, I don't think). Was responding to whines about "taxing productive people" and "going after Peter Theil", which is all about IRA loopholes.

(And actually, I don't know if he exploited the backdoor loophole, I think he just put founders stock which was "valued at" < $2k Roth limit in his Roth IRA, and it exploded.)

[Anonymous]

Anonymous wrote:This reminds me of people upset about the SECURE act ending the "stretch IRA" method of passing down inheritance. I just had a very hard time mustering any sympathy...

You know, you'd think so, but if you die at 47 with a 6 year old whose money-management skills at 28 you may not be able to perfectly predict, it's a different story.

[Anonymous]

Thiel essentially put a powerball lottery ticket in an IRA and it returned 10000x. It's not just luck because he knew he had very favorable odds, but there's still an enormous amount of luck involved. Others became jealous and since he was perceived to support Trump he became the perfect target. I'm all for capping IRAs - although I do think excess Roth balances should be distributed tax free, and excess traditional balances should enjoy long term capital gains rates where applicable. But the identity politics of the Thiel IRA policy really do bother me for some reason.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This reminds me of people upset about the SECURE act ending the "stretch IRA" method of passing down inheritance. I just had a very hard time mustering any sympathy...

You know, you'd think so, but if you die at 47 with a 6 year old whose money-management skills at 28 you may not be able to perfectly predict, it's a different story.

I think you can still structure a trust to hold the money, it just has to leave the IRA and be taxed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This reminds me of people upset about the SECURE act ending the "stretch IRA" method of passing down inheritance. I just had a very hard time mustering any sympathy...

You know, you'd think so, but if you die at 47 with a 6 year old whose money-management skills at 28 you may not be able to perfectly predict, it's a different story.

I think you can still structure a trust to hold the money, it just has to leave the IRA and be taxed.

Yes, that’s true. If you died when your kid was only 6 you might consider that an additional unfair thing to have happened to that kid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This reminds me of people upset about the SECURE act ending the "stretch IRA" method of passing down inheritance. I just had a very hard time mustering any sympathy...

You know, you'd think so, but if you die at 47 with a 6 year old whose money-management skills at 28 you may not be able to perfectly predict, it's a different story.

I think you can still structure a trust to hold the money, it just has to leave the IRA and be taxed.

Yes, that’s true. If you died when your kid was only 6 you might consider that an additional unfair thing to have happened to that kid.

If you die when the kid is 6 you have 22 years to distribute the funds out of the IRA. That's plenty of time.

[Anonymous]

Is this right, the current proposal now would limit contributions only for incomes above 400k AND retirement accounts over $10 million? If so, I would think a lot of recent higher earners have nothing to worry about. https://www.barrons.com/articles/roth-iras-changes-51633563458

[Anonymous]

I don’t have a subscription but your description isn’t complete. It also bans converting post tax money to Roth (so called back door Roth and the mega back door Roth) for ALL income levels immediately, thus hitting households above the Roth income limit but earning well below 400K.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Most of these apply to those with HHi over $400k. So if you make less you can still do it.

Yes, MOST do, but the backdoor roth is all incomes. Because it is basically a loophole they are closing. You have to make above the roth limit (~$200k for marrieds?) to even be considering this.

From the summary: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021."

It is a bummer for me personally - but good fiscal policy. I can't really argue that i deserve such a loop hole. Spouse and I both have access to megabackdoor roths, so we can save a crap ton of money that can grow tax free. I guess we'll switch to taxable accounts if this passes.

Sorry to break it to you, but the megabackdoor Roth is on the chopping block too

Sorry to break it to you, it isn't anymore.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Most of these apply to those with HHi over $400k. So if you make less you can still do it.

Yes, MOST do, but the backdoor roth is all incomes. Because it is basically a loophole they are closing. You have to make above the roth limit (~$200k for marrieds?) to even be considering this.

From the summary: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021."

It is a bummer for me personally - but good fiscal policy. I can't really argue that i deserve such a loop hole. Spouse and I both have access to megabackdoor roths, so we can save a crap ton of money that can grow tax free. I guess we'll switch to taxable accounts if this passes.

Sorry to break it to you, but the megabackdoor Roth is on the chopping block too

Sorry to break it to you, it isn't anymore.

Was there an update? What about the regular backdoor Roth?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I just started doing a mega back door in 2020. Hopefully this doesn’t pass

I hope it does so that you get no benefit from it.

Why would you not want people to get a benefit from it? I don’t get people like you.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Most of these apply to those with HHi over $400k. So if you make less you can still do it.

Yes, MOST do, but the backdoor roth is all incomes. Because it is basically a loophole they are closing. You have to make above the roth limit (~$200k for marrieds?) to even be considering this.

From the summary: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021."

It is a bummer for me personally - but good fiscal policy. I can't really argue that i deserve such a loop hole. Spouse and I both have access to megabackdoor roths, so we can save a crap ton of money that can grow tax free. I guess we'll switch to taxable accounts if this passes.

Sorry to break it to you, but the megabackdoor Roth is on the chopping block too

Sorry to break it to you, it isn't anymore.

Was there an update? What about the regular backdoor Roth?

All backdoor roths are out of the bill. Actually all retirement cuts/changes to generate tax money is out of the bill.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Most of these apply to those with HHi over $400k. So if you make less you can still do it.

Yes, MOST do, but the backdoor roth is all incomes. Because it is basically a loophole they are closing. You have to make above the roth limit (~$200k for marrieds?) to even be considering this.

From the summary: "Furthermore, this section prohibits all employee after-tax contributions in qualified plans and prohibits after-tax IRA contributions from being converted to Roth regardless of income level, effective for distributions, transfers, and contributions made after December 31, 2021."

It is a bummer for me personally - but good fiscal policy. I can't really argue that i deserve such a loop hole. Spouse and I both have access to megabackdoor roths, so we can save a crap ton of money that can grow tax free. I guess we'll switch to taxable accounts if this passes.

Sorry to break it to you, but the megabackdoor Roth is on the chopping block too

Sorry to break it to you, it isn't anymore.

Was there an update? What about the regular backdoor Roth?

All backdoor roths are out of the bill. Actually all retirement cuts/changes to generate tax money is out of the bill.

Good to know. They should focus on plugging existing loopholes, tightening estate tax laws and taxing corporations the same way they tax individuals - progressive tax and tax on worldwide income.

[Anonymous]

Anonymous wrote:JOE MANCHIN WILL SAVE US

Okay, I'm no fan of Joe Manchin in general and I hope he's replaced, but I'm glad the backdoor roth is still with us.

https://www.thinkadvisor.com/2021/10/29/biden-plan-drops-retirement-changes-leaves-backdoor-roths-intact/

Backdoor Roth IRA strategies are left intact in Biden's framework.
All the other retirement planning provisions approved by House Ways and Means have also been cut.

[Anonymous]

So is this pretty much set for this year? Or is there still a round of edits? Just curious if it’s settled