mispoken

We have done a lot of discussion about retirement in here.

One topic that often arises is Roth 401k (Roth IRA) vs 401k (TIRA) and this new proposed law could change things drastically. If part of your estate planning includes leaving money to heirs, under the new law they could no longer stretch distributions of a 401k or IRA over their lifetime. The new law would require that they take distribution over a 10 year period and in turn significantly increase their tax liability.

This would increase the value of a Roth account because while RMDs would still need to happen over the 10
year accelerated period, they would come out tax free.

So, if leaving wealth for future generations is part of your plan, you may want to watch how this unfolds.

https://www.forbes.com/sites/leonlabrecque/2019/04/23/new-proposed-stretch-ira-rules-will-have-a-big-effect-on-iras-and-it-could-cost-your-kids-thousands/

rickair7777

Also in some high-income/generous employer contribution cases the RMD can actually force a retiree with a large 401k into a higher tax bracket than when he was working! You should plan ahead for that, and the solution would be invest less in the 401k, more in Roth or other vehicles, to minimize the vig to Uncle.

crewdawg

Even more of a reason to live life so that when you die, you'll have enough to cover your final expenses, with a little left over. If you've done it right, your future generations will make their own money. You only get one shot...Carpe the heck out of this diem!

mispoken

I agree with that statement, Rickair777. Many on this board do not. However, those on the fence may find this law, if enacted, may tip them in favor of the Roth account vs alternatives.

freezingflyboy

Is a Roth 401k still subject to the same income limits as a Roth IRA?

SonicFlyer

Want to know how families like the Bushes and Kennedys became as powerful as they are?

By NOT following this advice.

crewdawg

Not it is not. Even so, the Roth IRA income limits are easily mitigated by the back-door Roth IRA.


I guess if power is something you crave, although it won't matter to you since you'll be dead. Also, leaving them cash in an account is not a way to get them there...it's leaving them cash producing assets. I never said anything about not leaving solid assets.

BobZ

The uber wealthy establish trusts and or charitable foundations. These can and are self funded.

The progeny can then feed off the foundation.

Just as a future management team decided they wernt gona abide by the specified pension terms.....some future government is likely to
change the rules on money they 'let' you accumulate in their provided accounts.

After all....Your money is locked up so what are you gona do?

Its reasonable to accumulate some assets in government created accounts. But as an exclusive means and at the expense of accumulating cash and assets outside of these accounts is not prudent.

Fortunately in this job we now have the resources to do both.

Hossharris

Throw me into that briar patch !

Gunfighter

Any type of tax advantaged account or entity is government created. They are the ones who create the taxes and therefore the exemptions or advantages. A trust, partnership or IRA are all subject to the whims of those in power. Aligning your interests with those who wield influence over that power by using trusts to transfer wealth, rather than retirement accounts or an estate tax exemption is a good idea.

A Roth is a great place to start, but it isn't the only vehicle. BobZ makes a great point about using methods outside of the Roth for wealth transfer. The most important aspect of wealth transfer IMHO is not the actual assets, it's teaching the method of accumulating and managing those assets. Instilling the work ethic it takes to create capital is part of the method. I've spent far more time educating my children on the process than I have on what the holdings are.

You wouldn't hand over keys to a car if your kids didn't know how to drive, the same goes for handing over an inheritance. The real inheritance is in the ability to manage what your are given and create more.