Interesting article on proposed IRA and Roth for high earners

[pb4uski]

DawgMan, I don't feel you are taking advantage of loopholes. You are taking advantage of a "backdoor" method which is permitted under the existing law. Once I saw the trigger word "loophole" introduced near the beginning of this thread, the discussion turned away from the substance of the article, I believe. This happens in most discussions. But then things get back on point.

I have no problem with tax law evolving, either.

+1 I don't have any problem with taxpayers of any level taking advantage of loopholes.... it is what it is and the taxpayer is complying with the law.

What I have a problem with is that when Congress attempts to close the loophole the ire of those who have been taking advantage of it that Congress is not closing a loophole but is rather "changing the rules". Well, duh! The only way to close a loophole is to change the rules!

A good example would be the ol' Roth conversion horse race strategy... which was a clever way of opmtimizing Roth conversions by doing several Roth conversions and recharacterizing the lower growth conversions... that strategy effectively killed the ability for everyone to do Roth recharacterizations. At the time, many of us were doing minor Roth recharacterization to fine tune our taxable income when we did our tax returns and the abuse of the recharacterization rules from the horse race strategy killed it.

 

[Winemaker]

The SECURE Act was passed in late 2019 because there were enough votes in Congress to pass it as a single law to reform retirement laws and correct past mistakes in law, or close loopholes, however one sees it. I was never able to use any of the loopholes, but DW and I have acquired a mid 7 figures, by socking away 22% of my income in a 401k and 403b, as well as the maximum amount in tIRAs and Roth IRAs, since they became available. The changes made won't effect me because I'll be dead, my heirs will be hit by the taxes.

The current proposal is part of a controversial infrastructure bill, which does not have 60 votes to pass in it's own right in the Senate. So in order for it to get it passed, the Congress critters are trying to make it a Reconciliation bill, requiring a simple majority. The retirement account law changes are hidden in the 2700 pages of the bill. If it was truly a recognized problem for the past 40 years, it should have been corrected with the SECURE ACT, which was passed to correct past mistakes, and close loopholes.

While the new proposal will still not affect me or DW, it will affect present day folks who were like me and my wife, 10, 15, 20 etc., years ago, by putting a income cap on Roth conversions in 10 years. But they are talking on both sides of their mouths, because they are still going to be able to spend the extra tax revenue created over the next ten years. But if DM mom passes, they would still be getting the tax revenue in 10 years from the SECURE Act, from her tIRA.

 

[RetireeRobert]

I think we’ve beaten the fairness of tax policy to the limit…

How about we stick to the details of this proposal instead?

You mean progress of eliminating the nasty unfair loopholes?

 

[MichaelB]

<mod note>Unfortunately, this thread discussion could have been useful but is no longer viable. Please note that “punish the rich” is a view that was not advocated by any forum member, yet it was posted repeatedly as a rhetorical red herring and only served to interfere with the effort for a more thoughtful conversation.

Snarky, sarcastic responses to polite posts are always unacceptable, as are partisan political comments. Multiple posts have been removed.