Are you worried that Congress may tax Roth IRA's in the future?

[M Paquette]

And there will be plenty to worry about, especially new taxes.

And falling asteroids. I don't wanna get smooshed!

 

[MichaelB]

And there will be plenty to worry about, especially new taxes.

If taxes were to return to the average they have held for the past 40 years (tax revenue % of GDP) I would be much less worried, not more.

 

[W2R]

Just a quick glance around the web and see in 2008 Roths accounted for less than 5% of all IRA funds.

In my case, my Roth IRA is less than 5% of the size of my TSP (=401K) account, so I am not really worried about it.

Even if my Roth represented more of my net worth, I wouldn't be worried about it. I just don't think that Roths will ever be taxed. They are small potatoes in comparison with so many other possible targets to tax.

 

[Sandhog]

Taxes comes in many forms and shapes. Much like water and sewer bill, sin taxes, phone bill,... I concurred with many posters that government will find a way to pretty much tax Roth somehow with a fancy name disguising as taxes.

 

[SteveL]

to Quote Mark Twain "No ones life, liberty, or property is safe while the legislature is in session."

Imagine ending the income tax, and installing a large vat and larger gasoline tax.

 

[growing_older]

I also believe it is a virtual certainty that Roth's will be taxed in some way. However, I also think it is likely that they will still be taxed favorably compared to other ways in which the assets could have been held. But since there can be no certainty about how future tax laws will be structured, my prudent approach is to not take any extreme position that counts on optimizing one scenario. By holding some Roth, some Traditional IRA and some taxable, I will not get the maximum benefit of unknowable future tax treatments, but I will hopefully also not get maximum exposure to any unfavorable development. My goal is not to maximize my holdings, my goal is to maximize the odds that my holdings will be enough.

 

[Independent]

I also believe it is a virtual certainty that Roth's will be taxed in some way. However, I also think it is likely that they will still be taxed favorably compared to other ways in which the assets could have been held. But since there can be no certainty about how future tax laws will be structured, my prudent approach is to not take any extreme position that counts on optimizing one scenario. By holding some Roth, some Traditional IRA and some taxable, I will not get the maximum benefit of unknowable future tax treatments, but I will hopefully also not get maximum exposure to any unfavorable development. My goal is not to maximize my holdings, my goal is to maximize the odds that my holdings will be enough.

+1

 

[packrat44]

It sounds a bit like a sports game with Politicians vs the Taxpayers. However, rather than a neutral party setting the goal and the rules of the game, one of the competing teams get to make the determinations. If the Politicians are in the lead, the rules remain as originally determined. If the Politicians fall behind, they simply change the rules to their favor.

 

[obgyn65]

Yes.

 

[Zoocat]

Recently,I heard David Stockman speak, in person, about the economy and his debt solutions and he said, twice, that "we have to find a way to tax people who spend out of their wealth." I was pretty surprised to hear that, and thought it sounded like an underhanded idea. I am pretty sure that he was referring to not only rich people who spend out of their wealth but retirees who spend their accumulated savings.

 

[Tadpole]

I am pretty sure that he was referring to not only rich people who spend out of their wealth but retirees who spend their accumulated savings.

That make no sense. Most retirees collect taxable dividends and people who have deferred savings are taxed at income rates. So who is the retiree that is spending savings that are not taxed? (I rather doubt that there are a lot of retirees out there with huge Roths at this time.) Then when they spend they have sales tax, etc.

 

[RustyShackleford]

Perhaps a more plausible sinister theory about Roths and taxation, and not one that might happen in the future, but one that IS happening now, is that all the financial press hype and tax incentives (such as suspending the AGI limits, allowing 2010 conversions to be taxed in 2011 and 2012, etc) is creating all this taxable income and tax revenue NOW. So it's effectively time-shifting future tax revenue to the present.

 

[Zoocat]

That make no sense. Most retirees collect taxable dividends and people who have deferred savings are taxed at income rates. So who is the retiree that is spending savings that are not taxed? (I rather doubt that there are a lot of retirees out there with huge Roths at this time.) Then when they spend they have sales tax, etc.

You're right, of course. But then would Stockman be referring to the wealthy who have a lot of cash that they spend every year? If some sort of tax was initiated, then wouldn't the wealthy just find some hard assets to buy? His statement really puzzled me at the time and I've been trying to figure it out.

 

[youbet]

You're right, of course. But then would Stockman be referring to the wealthy who have a lot of cash that they spend every year? If some sort of tax was initiated, then wouldn't the wealthy just find some hard assets to buy? His statement really puzzled me at the time and I've been trying to figure it out.

Oldbabe, you are correct in your take on Stockman's comments. The idea is to tax spending. A retiree holds one million bux. He/she spends, say, $30k of principal yearly with no tax due at the Fed level. Stockman would like to tax that spending. So you, Ms Retiree, cash in a CD to buy a car. Mr. Stockman would like that transaction to be taxed at the Fed level in addition to state and local sales taxes.

 

[Zoocat]

Oldbabe, you are correct in your take on Stockman's comments. The idea is to tax spending. A retiree holds one million bux. He/she spends, say, $30k of principal yearly with no tax due at the Fed level. Stockman would like to tax that spending. So you, Ms Retiree, cash in a CD to buy a car. Mr. Stockman would like that transaction to be taxed at the Fed level in addition to state and local sales taxes.

Ah ha! I thought so. Isn't that double, maybe triple, taxation? What a dastardly plan! Let's hope that Mr. Stockman retires from his campaign before he does too much damage.