Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:BTW, actual text of bill is available: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me. I'll just wait to see what (if anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022. If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.

How are taxes handled on the forced withdrawals from mega Roth IRAs? I couldn’t find that in the bill.

Why would there be taxes? It's a Roth IRA.

If you withdraw any profits from a Roth IRA before you turn 59 then you owe taxes today, but in the event of a forced withdrawal, I'm pretty sure it would have to be made tax free for everybody. Otherwise you'd have an awkward cliff and terrible optics ie. Warren Buffet and Mitt Romney withdrew tax free but somebody who had just turned 58 had to pay 40-50% tax on their withdrawal. Not to mention other issues of basic proportionality and fairness. It's really Congress' fault for creating the Roth loopholes in the first place.

I think you are asking about the proposed required distributions if your roth is very large, over $10M? This proposal states this only applies if your income is > $400/450k, BTW.

I can't make sense of the actual bill text to answer that question for you. I'd be a bit surprised if they allowed it to come out tax-free, but I also see your point about age not really being the main point, espeically at balances of $10M+.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:BTW, actual text of bill is available: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me. I'll just wait to see what (if anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022. If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.

How are taxes handled on the forced withdrawals from mega Roth IRAs? I couldn’t find that in the bill.

Why would there be taxes? It's a Roth IRA.

If you withdraw any profits from a Roth IRA before you turn 59 then you owe taxes today, but in the event of a forced withdrawal, I'm pretty sure it would have to be made tax free for everybody. Otherwise you'd have an awkward cliff and terrible optics ie. Warren Buffet and Mitt Romney withdrew tax free but somebody who had just turned 58 had to pay 40-50% tax on their withdrawal. Not to mention other issues of basic proportionality and fairness. It's really Congress' fault for creating the Roth loopholes in the first place.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:BTW, actual text of bill is available: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me. I'll just wait to see what (if anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022. If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.

How are taxes handled on the forced withdrawals from mega Roth IRAs? I couldn’t find that in the bill.

Why would there be taxes? It's a Roth IRA.

Anonymous wrote:

Anonymous wrote:BTW, actual text of bill is available: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me. I'll just wait to see what (if anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022. If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.

How are taxes handled on the forced withdrawals from mega Roth IRAs? I couldn’t find that in the bill.

Anonymous wrote:BTW, actual text of bill is available: https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/NEAL_032_xml.pdf

I didn't read it because it seems dense/boring, and doesn't really matter to me. I'll just wait to see what (if anything) actually passes.

I did accelerate my backdoor roth plans for late 2021, with the assumption it may not be an option for 2022. If it doesn't pass, then I'll just be a little ahead for 2022 and slow down savings in the first part of the year.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Slightly off topic but if Roth conversions are prohibited and I make too much for a deductible IRA contribution is there any advantage to contributing to an IRA vs. saving in a taxable account?

IRA gains would be taxed as ordinary income vs. capital gains in taxable account. Also, under the Secure Act the IRA would need to be distributed in ten years after death vs. no mandatory distributions from the taxable account. Also (for now), step up in basis on taxable account vs. none for IRA.

The only advantage I can think of is potentially enhanced bankruptcy protections for the IRA but I don't foresee that being an issue so not much value there for me.

IRA amounts are not considered for purposes of student financial aid.

PP here but let's be real if I'm making too much to qualify for a deductible IRA I probably won't be getting financial aid anyways.

Well, Jeff Bezos claimed the child tax credit because he shows little income despite having his wealth grow by billions. Do you have the ability to shrink/offset income while remaining wealthy?

Anonymous wrote:

Anonymous wrote:

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.

I am poor by DCUM standards.

+1

I am all for taxing the rich but this seems like small potatoes on what they should be focusing on.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Slightly off topic but if Roth conversions are prohibited and I make too much for a deductible IRA contribution is there any advantage to contributing to an IRA vs. saving in a taxable account?

IRA gains would be taxed as ordinary income vs. capital gains in taxable account. Also, under the Secure Act the IRA would need to be distributed in ten years after death vs. no mandatory distributions from the taxable account. Also (for now), step up in basis on taxable account vs. none for IRA.

The only advantage I can think of is potentially enhanced bankruptcy protections for the IRA but I don't foresee that being an issue so not much value there for me.

IRA amounts are not considered for purposes of student financial aid.

PP here but let's be real if I'm making too much to qualify for a deductible IRA I probably won't be getting financial aid anyways.

Anonymous wrote:

Anonymous wrote:Slightly off topic but if Roth conversions are prohibited and I make too much for a deductible IRA contribution is there any advantage to contributing to an IRA vs. saving in a taxable account?

IRA gains would be taxed as ordinary income vs. capital gains in taxable account. Also, under the Secure Act the IRA would need to be distributed in ten years after death vs. no mandatory distributions from the taxable account. Also (for now), step up in basis on taxable account vs. none for IRA.

The only advantage I can think of is potentially enhanced bankruptcy protections for the IRA but I don't foresee that being an issue so not much value there for me.

IRA amounts are not considered for purposes of student financial aid.

Anonymous wrote:Slightly off topic but if Roth conversions are prohibited and I make too much for a deductible IRA contribution is there any advantage to contributing to an IRA vs. saving in a taxable account?

IRA gains would be taxed as ordinary income vs. capital gains in taxable account. Also, under the Secure Act the IRA would need to be distributed in ten years after death vs. no mandatory distributions from the taxable account. Also (for now), step up in basis on taxable account vs. none for IRA.

The only advantage I can think of is potentially enhanced bankruptcy protections for the IRA but I don't foresee that being an issue so not much value there for me.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I am poor by DCUM standards.

+1

I am all for taxing the rich but this seems like small potatoes on what they should be focusing on.

But it’s not “small potatoes.” That’s what you’re not understanding. Especially when PE and VCs use it to shield private ownership stock from taxation when those shares inevitably explode in value.

Besides, the proposal already keeps the backdoor Roth for upper middle class households. We are a $400K HHI and will still get to use the backdoor Roth for savings. I think the limitations being proposed are actually quite sensible.

If this passes that statement is incorrect. Backdoor Roth is closed for everyone.

This is not true. You can read the Ways & Means Committee text:

In order to close these so-called “back-door” Roth IRA strategies, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (all indexed for inflation). This provision applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031.

The backdoor conversion is still available to the vast majority of middle class and upper middle class families. And this ban on Roth conversions for rich people doesn't go into effect for another decade.

You are wrong. Read the next paragraph. Or they actual text to the bill. Or any article that summarizes it

The text of the bill is not publicly available anywhere.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I am poor by DCUM standards.

+1

I am all for taxing the rich but this seems like small potatoes on what they should be focusing on.

But it’s not “small potatoes.” That’s what you’re not understanding. Especially when PE and VCs use it to shield private ownership stock from taxation when those shares inevitably explode in value.

Besides, the proposal already keeps the backdoor Roth for upper middle class households. We are a $400K HHI and will still get to use the backdoor Roth for savings. I think the limitations being proposed are actually quite sensible.

If this passes that statement is incorrect. Backdoor Roth is closed for everyone.

This is not true. You can read the Ways & Means Committee text:

In order to close these so-called “back-door” Roth IRA strategies, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (all indexed for inflation). This provision applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031.

The backdoor conversion is still available to the vast majority of middle class and upper middle class families. And this ban on Roth conversions for rich people doesn't go into effect for another decade.

You are wrong. Read the next paragraph. Or they actual text to the bill. Or any article that summarizes it

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

I am poor by DCUM standards.

+1

I am all for taxing the rich but this seems like small potatoes on what they should be focusing on.

But it’s not “small potatoes.” That’s what you’re not understanding. Especially when PE and VCs use it to shield private ownership stock from taxation when those shares inevitably explode in value.

Besides, the proposal already keeps the backdoor Roth for upper middle class households. We are a $400K HHI and will still get to use the backdoor Roth for savings. I think the limitations being proposed are actually quite sensible.

If this passes that statement is incorrect. Backdoor Roth is closed for everyone.

This is not true. You can read the Ways & Means Committee text:

In order to close these so-called “back-door” Roth IRA strategies, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (all indexed for inflation). This provision applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031.

The backdoor conversion is still available to the vast majority of middle class and upper middle class families. And this ban on Roth conversions for rich people doesn't go into effect for another decade.

You are wrong. Read the next paragraph. Or they actual text to the bill. Or any article that summarizes it

In order to close these so-called “back-door” Roth IRA strategies, the bill eliminates Roth conversions for both IRAs and employer-sponsored plans for single taxpayers (or taxpayers married filing separately) with taxable income over $400,000, married taxpayers filing jointly with taxable income over $450,000, and heads of households with taxable income over $425,000 (all indexed for inflation). This provision applies to distributions, transfers, and contributions made in taxable years beginning after December 31, 2031.

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.