Proposal to require Roth Distrib at 70.5

[bizlady]

Just read that the 2015 budget proposal includes requiring Roth distributions at age 70.5 and some changes in taxing inherited Roth's...

Should I Leave a Roth to My Heirs? - WSJ

 

[2B]

Worrying about what might happen to the tax code in the future doesn't have much benefit. When something gets close to being passed it's worth thinking about what you might be able to do to minimize the impact.

As the article says it will come close to eliminating any benefit for IRA to Roth conversions. Not being stupid, most people with significant IRAs won't convert and simply take their Roth RMD along with their IRA RMD. Excess over spending would go into a taxable investment account. It would reduce the tax revenue over the next decade or so as conversions stop to get a small increase after that via larger RMDs. In the short term thinking of DC, that's not what I would expect them to be trying to accomplish.

 

[gerntz]

Worrying about anything doesn't do much good. Trying to impact a choice/decision does.

 

[ziggy29]

At most "proposed" legislation might be worth thinking about potential ways to hedge your bets in the future, but they are almost never a valid reason to shift away from your current strategy. And usually when laws *are* passed like this, they are applied to future tax years so you may often still have time to make moves even after the bill is signed into law.

And in the general case, the whims of Washington are a good reason to remain diversified in your investment vehicles anyway, both in terms of minimizing the tax bite and in terms of managing taxable income in the future.

 

[Greencheese]

That's it, the world is coming to an end. Pack your bags and flee the country now!

 

[Telly]

Thanks, bizlady, for the heads-up. This never made it into the popular press back in March, nor since.

Here are more links on it:

The (Ed) Slott Report (def. worth reading): President Obama's 2015 Budget Includes A Possible Retirement Planning Game-Changer ~ Ed Slott and Company – IRA, Tax, Retirement Planning Articles, Insight

And a Credit Union common website:
Obama budget proposes significant changes to Roth IRAs « CU Insight

 

[Cobra9777]

Very interesting. For us, the potential benefit of Roth conversions was already tenuous at best, and likely negative in my lifetime. Subtract the estate-planning benefits, and I'm no longer on the fence. I'm out.

Of course, I'll wait and see what actually happens. But given that this is clearly on someone's chopping block, not to mention the countless other inherently fragile assumptions, I'll happily sit on the sidelines and watch my would-be tax prepayments continue to grow.

 

[FIREd]

And in the general case, the whims of Washington are a good reason to remain diversified in your investment vehicles anyway, both in terms of minimizing the tax bite and in terms of managing taxable income in the future.

+1. It's just too difficult to figure out what they are going to come up with next.

 

[gcgang]

http://www.forbes.com/sites/jamieho...changes-that-could-ruin-your-retirement-plan/

This "proposal" has been out there for a while.

Above article from April, 2014, talks about this as well as mentioning changes to Social Security claiming strategies. Again, these are just proposals at this time.


Sent from my iPad using Early Retirement Forum

 

[Animorph]

We'll be pulling from Roth accounts to fill in for expenses beyond the tIRA income we'll have, both within the low tax bracket or RMD's. The Roth conversions are still an important strategy for us. Unless the RMD for Roths is unreasonably high, this would probably not be an issue for us.