zippinbye

Before our retirement accounts themselves are directly targeted with rule changes, your asset value within them will be used to calculate a Social Security offset. Along with any pension income you may be due. Many of us presume S.S. will fold or become a greatly diminished benefit during our retirement lifetime. At 56, I plan my retirement strategies as if I will have zero S.S. income, except for seeking as much tax free retirement income as possible. However, I am hopeful that the S.S. checks will roll in as a "bonus."

Before Social Security goes insolvent, I'm quite certain folks who were high earners and fastidious savers will be "penalized" for their wealth accumulation by decreasing their Social Security benefit. Which is probably the first line of attack for the mind set perpetuated by the A.O.C. and Elizabeth Warren types. Their more grandiose wishes for an overall wealth tax will get an initial foothold by taking "unnecessary public benefits" from the "rich." Productive member of society? Financially responsible? Low debt/committed saver? - Bam, here's your reward! You don't need all that Social Security benefit that you have earned! The younger you are, the more likely you are to be impacted in such a manner.

Gunfighter

Timing distributions for minimization of taxable income is one reason for avoiding the RMD. You may use the Roth funds only in years you spend more, like a new car, boat, house, grandchildren's college, etc. Also, there are those who will be leaving an estate to their much younger spouse or children. Avoiding RMDs via a Roth IRA is suitable for that purpose as well.

full of luv

Didn't many of the prez candidates already float a "wealth" tax vs an income tax? Sure (either 1-2%) annually for over $10mil crowd at first, but just as the income tax started as a paltry affair (1-7%) at first, the source of income will be intoxicating to power hungry politicians who may become more powerful.

Comparing this COA to "Obama will seize all the guns" is apples to oranges as the Constitution gets in the way of that threat. There is no enshrinement of the Roth IRA in the constitution.

You do have to play by the rules today, but there is a general rule that many rich abide by to, "never volunteer to pay a tax today that can be deferred until tomorrow."

I would just say that calculating the odds that the Roth IRA may be attacked for taxes in the future should at least be a consideration in your decision to convert tax deferred funds into a Roth at this point of time.

gloopy

Kind of is though. There's the "no ex post facto" provision, not that they always worry about that of course. Then there's the tax methodology itself, where pretty much everyone not on a campaign trail at the moment at least realize that the "wealth tax" fantasy is blatantly unconstitutional and would require an amendment, and fat chance of that although you never know. They could always get a few years out of it by "shopping" in the right circuits.

Means testing for SS and whatever mandatory medical abomination we're living under by then will hapen way before that does anyway because its just easier. Then they'll come for more, and it will be a lot more, because there is no way what already exists can ever be paid for and they intend to expand everything and extend it to everyone on earth who wants to come and partake. Fun times.

Gunfighter

Equal consideration should be given to the likelihood of increases in income taxes for tax deferred accounts. Income tax rates are in a down cycle right now, it is highly likely that rates will be higher, even in lower brackets. When retired, you won't have as many deductions as you do now like mortgage interest, children, etc.

Additionally, any large withdrawals from a deferred account will increase your taxable income in that year. Having a mix of Roth, tax deferred and non-retirement funds available is a good tax risk mitigation strategy. Have I mentioned owning income producing property is one good retirement tax strategy?

full of luv

Good points, I would consider it almost a surety that income tax rates will be higher in the future, so that is probably another valid consideration.

sailingfun

Your tax bracket should however be lower. I don’t expect the increase in tax rates to exceed dropping down in brackets.

Dodo

I think traditional IRAs are going to be under attack first. Sucks to be those who were too invested or too old to make a Roth worth doing back in the '90s. Re-taxing distributions on a Roth will cause a major caterwaul among those who already paid taxes on that money.


But, in this crazy time of "can't spend enough" that we're currently watching, you may be right.

duece12345

Do we get the international override on international deadheads?

Bucking Bar

Also like "all the above" and would add the consideration: what if you decide to retire somewhere other than these United States?

Anyone who does their own taxes has noticed quite a few more questions related to offshore entities and accounts. MHO, the politicians will, at some point, try to make it very hard to get some monies out of the US. The "fat stacks of cash" you've already paid tax on are mostly yours.

The effective rate on short term earnings is down 50% from years past.