Roth IRA – Conversion fee protection if law changes?
If I were to decide to commit to a Roth IRA conversion and pay the income tax up front, how can I ensure I am protected from future taxation were the law to change (say several years down the road when the government needs to raise more money)? Are there any clauses or laws which would protect me against this?
Permalink Submitted by mk foss on Wed, 2010-03-24 18:18
There are no protections from changes in tax laws when you make a Roth conversion. However, whenever Congress has made changes in the tax laws affecting retirement, they have included “grandfather” provisions to protect people who were relying on the old law. They don’t have to “grandfather” Roth provisions but the pressure would be on to do so.
If we switched to a consumption-based tax – like a national sales tax or a value added tax – the Roth conversion would not help. Most experts agree that an income tax would be needed as well as one of those kinds of taxes, so I don’t think that’s a worry here.
With the economy as it is, I don’t see Congress eliminating a provision where people are prepaying their tax soon.