ROTH IRA(possible changes)
I am considering the possibility of the govt changing the rules regarding the ROTH IRA tax exclusion. Do you think this will be an avenue for the govt to increase the budget revenue? ROTH $$ is after tax, therefore do you think the tax exclusion for the ROTH IRA will be left intact in the future. It would be a real bummer to have accumulated $$ in a ROTH IRA thinking it will be tax free only to have the rules change and have the govt get their hooks into the future returns.
Social Security is taxed at graduated income levels. I mean that does not make sense first the govt gives $$ out via social security then takes it back via taxes on the entitlement that was implemented.
Permalink Submitted by Alan Spross on Tue, 2012-12-04 00:53
In the near term, the amount of pre tax deductions for contributions is subject to pressure, not Roths. Roth contributions are after tax and therefore provide immediate tax revenue compared to pre tax contributions. For 2010, special legislation eliminated the income limits on Roth conversions going forward, making it easier to for more higher income people to convert to Roth IRAs, with tax revenue generated on those conversions. To make any changes to Roth rules for the next few years would therefore constitute a greivous example of “bait and switch”.
Taxing Roth earnings would basically gut the Roth IRA, and make Roth IRAs into non deductible TIRA accounts with better distribution rules. So I would not worry about this unless the financial picture gets much worse than it currently stands. Even if the entire Roth program was terminated, existing Roth IRAs would likely have to be grandfathered, so if anything that possibility makes current Roth IRAs more attractive.