Author Topic: New Roth IRA limitations proposed today  (Read 7724 times)

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #50 on: September 14, 2021, 08:15:00 PM »
@seattlecyclone thanks for the break down. I have a work place ESOP at a privately held company that's a qualified retirement plan. We're an s Corp esop. Does this 10mil limit apply to funds in that account added to funds in our 401k?

I believe so. There's actually a special section about how to handle ESOP retirement plans. Quoted below:

Quote
(iii) SPECIAL RULES FOR EMPLOYEE STOCK OWNERSHIP PLANS.óIf any payee to which this subsection applies for any taxable year has account balances in 1 or more employee stock ownership plans (as defined in section 4975(e)(7)) any portion of which is invested in employer securities which are not readily tradable on an securities market, the increase in minimum required distributions by reason of this subsection shall be allocatedó
    (I) first to all account balances (other than such portions) of the payee in all applicable retirement plans in the manner provided by this subparagraph (without regard to this clause), and
    (II) then to such portions in such manner as the taxpayer chooses.
The Secretary shall prescribe regulations which provide that if any such increase is allocated to any such portion of an account balance for the first taxable year of the payee beginning in 2022, the payee may elect to have such portion distributed over a period of years not greater than the period specified by the Secretary in such regulations (and any distributions made in accordance with such election shall be treated for purposes of this section as made in such first taxable year).

What I think it's saying is that if you're over $10 million and you have some non-publicly-traded stock in one or more ESOP accounts, you're supposed to take your special high-balance RMD first from any other retirement accounts you have. If you empty those out and still need to take out some high-balance RMD from your ESOP(s) in 2022, the IRS is supposed to make some regulations for how you can do that over a period of a few years instead of all at once, and it will still count toward the 2022 RMD. In 2023 and later, I guess you'll need to figure out how to liquidate it all at once.

This is really interesting. I'm not sure if this will lead to more or less turnover at my company. On the one hand they can't keep amassing large wealth. On the other hand they will be getting 1-2million dollar penalty free distributions after age 50ish. What stinks is the size and cost of those. Esop lobby is pretty well seated with a bunch of Congress. But no one is going to die on this sword bc ESOPs are few and far between.

seattlecyclone

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Re: New Roth IRA limitations proposed today
« Reply #51 on: September 14, 2021, 10:01:39 PM »
Good lord, the social engineering that goes on with the tax code.

Well...yes. Any tax will create incentives. There's literally no way to tax things without nudging behavior one way or another. Might as well nudge people to do the things you want them to do rather than the things you don't want them to do.

Gatzbie

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Re: New Roth IRA limitations proposed today
« Reply #52 on: September 14, 2021, 11:41:58 PM »
Hmmmm without mega backdoor roth. Looks like all my leftover money will now have to go to a taxable brokerage account. Guess I can try to utilize mega backdoor roth as much as possible over these last remaining months (unless something changes).

Bummer.
« Last Edit: September 14, 2021, 11:44:39 PM by Gatzbie »

secondcor521

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Re: New Roth IRA limitations proposed today
« Reply #53 on: September 15, 2021, 12:06:42 AM »
Hmmmm without mega backdoor roth. Looks like all my leftover money will now have to go to a taxable brokerage account. Guess I can try to utilize mega backdoor roth as much as possible over these last remaining months (unless something changes).

Bummer.

It's not a law yet.

https://www.youtube.com/watch?v=OgVKvqTItto

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #54 on: September 15, 2021, 05:26:29 AM »
Hmmmm without mega backdoor roth. Looks like all my leftover money will now have to go to a taxable brokerage account. Guess I can try to utilize mega backdoor roth as much as possible over these last remaining months (unless something changes).

Bummer.

It's not a law yet.

https://www.youtube.com/watch?v=OgVKvqTItto

while you're correct its not a law YET they tried to put something similar in the trump tax "cuts" that was eventually removed congress has been coming after this for a while i think this portion will likely stay i dont see any reason manchin would oppose this.

ender

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Re: New Roth IRA limitations proposed today
« Reply #55 on: September 15, 2021, 05:45:40 AM »
Hmmmm without mega backdoor roth. Looks like all my leftover money will now have to go to a taxable brokerage account. Guess I can try to utilize mega backdoor roth as much as possible over these last remaining months (unless something changes).

Bummer.

For FIRE seeking folks, I think the main impact really is that dividends make planning your income for ACA optimization annoying.

Realistically unless you're taking a long path to FIRE the difference between Roth contributions (via Roth IRA/megabackdoor) and taxable is pretty minimal.

chasesfish

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Re: New Roth IRA limitations proposed today
« Reply #56 on: September 15, 2021, 05:54:14 AM »
Dividends are less of an issue than these small real estate partnerships I can no longer hold inside an IRA.

I was giving up the nice depreciation deductions but won't get hit with a surprise capital gain when they sell.

Now I have to plan for the ACA while not knowing if I'll get a $20,000+ capital gain hit in the year they go full cycle.

If they kept the $10mil balance rule in, the effect of holding an accredited investment in an IRA is nil.   Usually politicians bend over backwards for the real estate lobby, like leaving the 1031 untouched yet again.

rmorris50

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Re: New Roth IRA limitations proposed today
« Reply #57 on: September 15, 2021, 06:02:21 AM »
Good lord, the social engineering that goes on with the tax code.

Well...yes. Any tax will create incentives. There's literally no way to tax things without nudging behavior one way or another. Might as well nudge people to do the things you want them to do rather than the things you don't want them to do.
I feel like nudging and engineering are two completely different levels of complication.


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EvenSteven

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Re: New Roth IRA limitations proposed today
« Reply #58 on: September 15, 2021, 06:21:36 AM »
Dividends are less of an issue than these small real estate partnerships I can no longer hold inside an IRA.

I was giving up the nice depreciation deductions but won't get hit with a surprise capital gain when they sell.

Now I have to plan for the ACA while not knowing if I'll get a $20,000+ capital gain hit in the year they go full cycle.

If they kept the $10mil balance rule in, the effect of holding an accredited investment in an IRA is nil.   Usually politicians bend over backwards for the real estate lobby, like leaving the 1031 untouched yet again.

But isnít a permanent elimination of the tax cliff in there too? That would make precise ACA planning much less important.

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #59 on: September 15, 2021, 06:38:17 AM »
Dividends are less of an issue than these small real estate partnerships I can no longer hold inside an IRA.

I was giving up the nice depreciation deductions but won't get hit with a surprise capital gain when they sell.

Now I have to plan for the ACA while not knowing if I'll get a $20,000+ capital gain hit in the year they go full cycle.

If they kept the $10mil balance rule in, the effect of holding an accredited investment in an IRA is nil.   Usually politicians bend over backwards for the real estate lobby, like leaving the 1031 untouched yet again.

But isnít a permanent elimination of the tax cliff in there too? That would make precise ACA planning much less important.

exactly the elimination of the tax cliff and the lower percentage to income are staying in place if this doesnt change.  This and the 2 child/childcare portions bring the most value to FIRE people with kids. 

dandarc

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Re: New Roth IRA limitations proposed today
« Reply #60 on: September 15, 2021, 08:15:29 AM »
Dividends are less of an issue than these small real estate partnerships I can no longer hold inside an IRA.

I was giving up the nice depreciation deductions but won't get hit with a surprise capital gain when they sell.

Now I have to plan for the ACA while not knowing if I'll get a $20,000+ capital gain hit in the year they go full cycle.

If they kept the $10mil balance rule in, the effect of holding an accredited investment in an IRA is nil.   Usually politicians bend over backwards for the real estate lobby, like leaving the 1031 untouched yet again.

But isnít a permanent elimination of the tax cliff in there too? That would make precise ACA planning much less important.
For those who might be able to manage income down below 200% of FPL, perhaps not - I think that cliff where the silver plans start to become gold / platinum remains. So there is still stuff to improve but definitely a big improvement.

ysette9

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Re: New Roth IRA limitations proposed today
« Reply #61 on: September 15, 2021, 09:04:26 AM »
So since Iím reading this piecemeal with kids screaming in the background, help my understanding. If Iíve got a chunk of traditional retirement money I was planning on converting gradually starting next year at FIRE now I have to do all of that in 2022 if this passes as-is?

ixtap

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Re: New Roth IRA limitations proposed today
« Reply #62 on: September 15, 2021, 09:09:06 AM »
So since Iím reading this piecemeal with kids screaming in the background, help my understanding. If Iíve got a chunk of traditional retirement money I was planning on converting gradually starting next year at FIRE now I have to do all of that in 2022 if this passes as-is?

Only if you will have over $400k in income in FIRE.

For those with less than $400k in income and less than $10M in retirement accounts, the main effect of this is to eliminate non deductible contributions used for the backdoors. I did not see, and someone else mentioned the same, that there doesn't seem to be any provision for non deductible contributions that are sitting in those accounts at the end of 2021 and whether or not they can be converted later without owing taxes.

I figure at this point, the MBR is saving us about $1000 in capital gains taxes (including NIIT) a year. Funny thing though, last year, even though we managed to do the conversion in the Sep/Oct dip, the gains were so high that we owed about that much for the conversion itself, anyway.
« Last Edit: September 15, 2021, 09:29:50 AM by ixtap »

chasesfish

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Re: New Roth IRA limitations proposed today
« Reply #63 on: September 15, 2021, 09:22:16 AM »
@Even Steven It'll still impact whether or not you can get the Cost Sharing Reduction

https://www.healthcare.gov/glossary/cost-sharing-reduction/

EvenSteven

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Re: New Roth IRA limitations proposed today
« Reply #64 on: September 15, 2021, 09:52:56 AM »
@Even Steven It'll still impact whether or not you can get the Cost Sharing Reduction

https://www.healthcare.gov/glossary/cost-sharing-reduction/

Thanks. So this is a second tax cliff related to the ACA up to 250% poverty level (~65K for family of 4), which will remain? After browsing a few pages on CSR, I'm not clear on how valuable CSR is. Does it make a significant difference in typical costs, or maybe a big deal at the higher end of health expenses?

dandarc

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Re: New Roth IRA limitations proposed today
« Reply #65 on: September 15, 2021, 10:15:53 AM »
@Even Steven It'll still impact whether or not you can get the Cost Sharing Reduction

https://www.healthcare.gov/glossary/cost-sharing-reduction/

Thanks. So this is a second tax cliff related to the ACA up to 250% poverty level (~65K for family of 4), which will remain? After browsing a few pages on CSR, I'm not clear on how valuable CSR is. Does it make a significant difference in typical costs, or maybe a big deal at the higher end of health expenses?
I mean, healthcare.gov you can run examples yourself, but ran in my zipcode for my wife and I. Screen captures attached of the exact same silver-plan.

At $44K income, there are no additional cost savings - the deductible is $10,900, copays are $35 for drugs, $20 for Doctor, 35% co-insurance for ER or specialist.
At $42K income, the CSR reductions have just kicked in a little - the deductible is $5,990, so almost $4k lower there.
At $24K income then we're getting to maxed out on the CSR savings - $0 deductible, $3 copays. Still $25% coinsurance but the OOP Max is only $3,050.

So depending on medical situation, that can get to be a pretty big deal even at top of range - actually this is a good example of that. $2K of income difference, for someone who routinely hits the deductible, makes a $4K difference just in deductible.

If you're able to get income low enough, savings in addition to the premium tax credit are huge. At that $24K level, you're actually getting a better deal on deductibles and copays and such than any of the Gold Plans, and arguably the Platinum plans as well (platinum, which is much more expensive on premiums, tends to have lower ER and specialist copays, but higher drug and regular doctor copays).

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #66 on: September 15, 2021, 10:25:10 AM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".

dandarc

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Re: New Roth IRA limitations proposed today
« Reply #67 on: September 15, 2021, 10:29:37 AM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".
I imagine you could game this pretty well for a year or two before they start really looking in to your income estimates, no?

Steeze

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Re: New Roth IRA limitations proposed today
« Reply #68 on: September 15, 2021, 10:35:27 AM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".

Seems like a crazy loop hole, why not just do this on purpose to have artificially low deductibles?

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #69 on: September 15, 2021, 10:42:36 AM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".

Seems like a crazy loop hole, why not just do this on purpose to have artificially low deductibles?

Yeah can anyone elaborate on penalties for getting this wrong.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #70 on: September 15, 2021, 10:51:55 AM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".

Seems like a crazy loop hole, why not just do this on purpose to have artificially low deductibles?

Yeah can anyone elaborate on penalties for getting this wrong.
I'm not a lawyer, but I suspect it's basically the difference between getting it wrong every now and then (believable, it happens), and getting it wrong year after year. When you send in your application, you do swear that the information is true to the best of your knowledge. Surely at some point on this continuum it would fall under a broad tax fraud statute? 

I have no idea whether you would be prosecuted for it, and I don't intend on finding out. Knowingly lying to get tax credits is a very bad idea.

Steeze

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Re: New Roth IRA limitations proposed today
« Reply #71 on: September 15, 2021, 12:03:04 PM »
Yes, the CSRs are a big cliff all by themselves. It's often thousands of dollars of difference in deductibles and co-pays. It doesn't matter as much if you don't expect to use medical services.

Thankfully they cannot be clawed back. If you accidentally underestimate your income you will pay a portion of the subsidized premiums back at tax time (the calculation is complicated, but it's not 100%), but you will have captured the value of the CSRs "for free".

Seems like a crazy loop hole, why not just do this on purpose to have artificially low deductibles?

Yeah can anyone elaborate on penalties for getting this wrong.
I'm not a lawyer, but I suspect it's basically the difference between getting it wrong every now and then (believable, it happens), and getting it wrong year after year. When you send in your application, you do swear that the information is true to the best of your knowledge. Surely at some point on this continuum it would fall under a broad tax fraud statute? 

I have no idea whether you would be prosecuted for it, and I don't intend on finding out. Knowingly lying to get tax credits is a very bad idea.

Fair, but based on the previous posts +/- $2000 seems like a reasonable margin of error and has significant impact on CSR. I certainly couldn't estimate my income within $2000, my margin of error is more like +/- $10,000, and I can image for those working on commission it is even greater. I suppose as long as you can check the box "to the best of my knowledge" honestly you are ok. Seems like a lot of incentive to always estimate the low end of your expected range though.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #72 on: September 15, 2021, 12:33:33 PM »
Right, a $2,000 miss seems very reasonable to me (and I suspect everyone else), especially if you don't have salaried income. Even a $10,000 miss. Sometimes money just falls into your lap, and you shouldn't lose sleep over having written down another number on a form 6 months ago. My point isn't that you should not go out of your way to game it, establishing a clear pattern of abuse.

The CSRs are actually down to the dollar because it's a step function of the percentage of FPL. Something like income $25,250 -> CSR 73, income $25,249 -> CSR 87 (much better).
« Last Edit: September 15, 2021, 12:36:18 PM by Paul der Krake »

NaN

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Re: New Roth IRA limitations proposed today
« Reply #73 on: September 15, 2021, 09:03:45 PM »
Ok, the ACA tax cliff took this thread off on a tangent.

Something most do not realize is there are limits their employee 401k plan has on contributions from highly compensated employees (HCE). Look this up if you are curious - not easily explainable. There is some basis in these retirement savings tax-benefits to make sure these mechanisms are not just used by the well-off but that they are also used heavily by lower income earners. Whether that is what is actually happening is a topic for another time, but that is probably one of the major motivations circulating in DC to remove this Roth backdoor loophole. It just screams social injustice.

With that said, this should be a warning to anyone here that tax codes can change anytime. Will it happen this year and start 2022? Unlikely, but it could happen. I would maybe think 2023 would be more likely if Democrats take more seats in House and Senate.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #74 on: September 15, 2021, 09:06:28 PM »
HCE limits are not the norm, plenty of companies don't have them. In fact, a plan having limits for HCEs is usually a sign that the plan is kinda shit to begin with.

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #75 on: September 16, 2021, 05:04:04 AM »
HCE limits are not the norm, plenty of companies don't have them. In fact, a plan having limits for HCEs is usually a sign that the plan is kinda shit to begin with.

Hce limits are an IRS law not plan specific. Companies must comply

Systems101

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Re: New Roth IRA limitations proposed today
« Reply #76 on: September 16, 2021, 09:07:53 AM »
HCE limits are not the norm, plenty of companies don't have them. In fact, a plan having limits for HCEs is usually a sign that the plan is kinda shit to begin with.

Hce limits are an IRS law not plan specific. Companies must comply

Perhaps the point is the safe harbors against HCE limits are ... rather easy to hit if the plan is any good...

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #77 on: September 16, 2021, 09:46:40 AM »
HCE limits are not the norm, plenty of companies don't have them. In fact, a plan having limits for HCEs is usually a sign that the plan is kinda shit to begin with.

Hce limits are an IRS law not plan specific. Companies must comply

Perhaps the point is the safe harbors against HCE limits are ... rather easy to hit if the plan is any good...

this is more accurate i can agree to that.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #78 on: September 16, 2021, 09:53:46 AM »
HCE limits are not the norm, plenty of companies don't have them. In fact, a plan having limits for HCEs is usually a sign that the plan is kinda shit to begin with.

Hce limits are an IRS law not plan specific. Companies must comply

Perhaps the point is the safe harbors against HCE limits are ... rather easy to hit if the plan is any good...

Yes, that's what I meant. It's one thing to set up your 401(k), perhaps early in the company history, with a not-so-great plan that fails the non-discrimination tests. I get it, matching costs money, you have a million more pressing things to do.

But then the IRS sends you a letter that says, hey employer, your plan isn't compliant, you can fix this by:
1) modestly improving your match in one of these 3 ways that every custodian in the country already knows about, or
2) adding convoluted HCE restrictions and/or clawbacks in place, communicating them to everyone, wasting everyone's time.

Door #1 is the right thing to do. Door #2 broadcasts to everyone, but especially your most valued employees (the HCEs), how little you care about their retirement security.

ender

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Re: New Roth IRA limitations proposed today
« Reply #79 on: September 16, 2021, 10:14:29 AM »
Note you can still fail mega backdoor non discrimination testing even if you're safe harbor.

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #80 on: September 16, 2021, 10:15:54 AM »
Note you can still fail mega backdoor non discrimination testing even if you're safe harbor.

S Corp ESOPs in addition to 401k plans in the same company also create an issue here.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #81 on: September 16, 2021, 10:29:29 AM »
Note you can still fail mega backdoor non discrimination testing even if you're safe harbor.
That's a good point, completely forgot about that. But at least, if the administrators have any common sense, you're not losing on pre-tax space, which is arguably more important for HCEs.

If I had a plan with a mega backdoor Roth and was told I'm losing, say, 5k of contribution space, I'd much, much, much rather lose it in the after-tax bucket than the pre-tax bucket.

chasesfish

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Re: New Roth IRA limitations proposed today
« Reply #82 on: September 16, 2021, 02:46:19 PM »
Sorry about taking this thread on a CSR tangent...

It's always been fascinating, Root of Good does a great job talking about this in his various monthly updates (www.rootofgood.com).  CSRs basically make healthcare in the US nearly for a FIREy person with kids.  That is still a huge cliff compared to just premium subsidies.

I have an exchange high deductible plan, but it's a fight just to get them to qualify stuff I pay for out of pocket towards my deductible.

NaN

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Re: New Roth IRA limitations proposed today
« Reply #83 on: September 16, 2021, 04:53:31 PM »
Ah, yes, good discussion on the HCE impacts for both pre-tax and after-tax buckets. I have not heard of a company taking away after-tax contribution space.  If it is a pretty rare thing I think that exactly makes the point why some may want to remove the MBR. If everyone started doing it, it might be more noticed. I think it is becoming more widespread.

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Re: New Roth IRA limitations proposed today
« Reply #84 on: September 19, 2021, 08:30:48 PM »


It looks like I may stay in government instead of jumping to the private sector until this goes through or is shot down. 457(b) plans are still amazing.
[/quote]

Do you have access to a Roth 457? My 457 plan offers both pre-tax and roth contributions, and I thought it might be better to prioritize roth contributions, especially considering these potential changes.

DadJokes

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Re: New Roth IRA limitations proposed today
« Reply #85 on: September 20, 2021, 04:52:02 AM »
Quote

It looks like I may stay in government instead of jumping to the private sector until this goes through or is shot down. 457(b) plans are still amazing.

Do you have access to a Roth 457? My 457 plan offers both pre-tax and roth contributions, and I thought it might be better to prioritize roth contributions, especially considering these potential changes.

Mine does not offer a Roth option. However, that's fine with me. We max the pre-tax 457 and split 401(k) & IRA contributions between pre-tax and Roth.

dandarc

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Re: New Roth IRA limitations proposed today
« Reply #86 on: September 20, 2021, 05:55:48 AM »
Roth 457 probably doesn't work quite the way you expect - if you're going to wait until 59.5 or till it into a Ruth IRA someday have at it, but if you want to use it to withdraw before 59.5, read up on the tax treatment upon withdrawal before contributing.

Babybalrog

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Re: New Roth IRA limitations proposed today
« Reply #87 on: September 22, 2021, 01:55:08 PM »
Quote
* No more purchasing investments requiring accredited investor (or similar) status in an IRA after 2021, and if you have any such investments already in your IRA you'll need to dispose of them by the end of 2023.
* No more investing through your IRA in privately-held businesses where you own at least 10% of the shares, or any businesses where you serve on the board of directors (or similar). Any such pre-existing investments will need to be sold by the end of 2023.

Those are rough. While IRA's holding accredited investments shouldn't be a big change. The Privately-held business elimination kills the entire self directed IRA industry. This hurts real estate developers who rely on private money, that is often a self directed IRA, and anyone who would rather invest in assets other than Wall Street. Seems like they need to retool that.

Also, that's a pretty short timeline to unwind these things when many syndications have 5 year holds and Private Equity 10 years.

astvilla

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Re: New Roth IRA limitations proposed today
« Reply #88 on: September 24, 2021, 09:14:02 AM »
This is a horrible piece of tax legislation for most Mustachians. In fact, this whole bill just seems to be a sleuth of a lot of unsavory legislation that will be forced through and accepted by most cause everyone is sort of getting something they want.

Eliminating the mega Roth kills my plans. I just started and now they kill it. There are many better ways to do this but most people using mega Roth are average folks like us who want to save more for retirement as Social Security won't be there for many of us. If anything, this is more a tax on average poorer people and not the Peter Thiels of the world. And I'm sure the Peter Thiels out there will still find a loophole but the average Joe like us will be left losing paying more taxes while only adding $4 billion in tax revenue. And they decide it's better to give $1 billion to a rich country like Israel. Jeez I'm thinking of switching my votes next election cycle.

Too bad there isn't some lobby or anyone who wants to represent for aggressive savers out there in Congress. Looks like our silence means higher taxes on us average folk.

ender

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Re: New Roth IRA limitations proposed today
« Reply #89 on: September 24, 2021, 09:31:09 AM »
This is a horrible piece of tax legislation for most Mustachians. In fact, this whole bill just seems to be a sleuth of a lot of unsavory legislation that will be forced through and accepted by most cause everyone is sort of getting something they want.

Eliminating the mega Roth kills my plans. I just started and now they kill it. There are many better ways to do this but most people using mega Roth are average folks like us who want to save more for retirement as Social Security won't be there for many of us. If anything, this is more a tax on average poorer people and not the Peter Thiels of the world. And I'm sure the Peter Thiels out there will still find a loophole but the average Joe like us will be left losing paying more taxes while only adding $4 billion in tax revenue. And they decide it's better to give $1 billion to a rich country like Israel. Jeez I'm thinking of switching my votes next election cycle.

Too bad there isn't some lobby or anyone who wants to represent for aggressive savers out there in Congress. Looks like our silence means higher taxes on us average folk.

Say what?

The megabackdoor impacts mustachians the least of any demographic since the advantage of Roth vs taxable for most mustachians is minimal, due to the fact that most MMM folks retire fast relative to the average person.

I have no idea how your plans could depend on the megabackdoor Roth IRA and be killed entirely by that change.

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #90 on: September 24, 2021, 10:48:53 AM »
This is a horrible piece of tax legislation for most Mustachians. In fact, this whole bill just seems to be a sleuth of a lot of unsavory legislation that will be forced through and accepted by most cause everyone is sort of getting something they want.

Eliminating the mega Roth kills my plans. I just started and now they kill it. There are many better ways to do this but most people using mega Roth are average folks like us who want to save more for retirement as Social Security won't be there for many of us. If anything, this is more a tax on average poorer people and not the Peter Thiels of the world. And I'm sure the Peter Thiels out there will still find a loophole but the average Joe like us will be left losing paying more taxes while only adding $4 billion in tax revenue. And they decide it's better to give $1 billion to a rich country like Israel. Jeez I'm thinking of switching my votes next election cycle.

Too bad there isn't some lobby or anyone who wants to represent for aggressive savers out there in Congress. Looks like our silence means higher taxes on us average folk.

Say what?

The megabackdoor impacts mustachians the least of any demographic since the advantage of Roth vs taxable for most mustachians is minimal, due to the fact that most MMM folks retire fast relative to the average person.

I have no idea how your plans could depend on the megabackdoor Roth IRA and be killed entirely by that change.

Yeah. Having a larger taxable in my opinion is better and more flexible than a large mega back door bc only those contributions are tapable I can borrow against my taxable. Obviously rates won't stay in a cellar forever but. It's likely a much better long term strategy than selling investments

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #91 on: September 24, 2021, 10:51:27 AM »
Will anyone think of the average mega backdoor Roth Joes?

ender

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Re: New Roth IRA limitations proposed today
« Reply #92 on: September 24, 2021, 12:09:05 PM »
Will anyone think of the average mega backdoor Roth Joes?

Pretty sure they almost all work in tech. heh.

seattlecyclone

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Re: New Roth IRA limitations proposed today
« Reply #93 on: September 24, 2021, 05:10:50 PM »
Will anyone think of the average mega backdoor Roth Joes?

Pretty sure they almost all work in tech. heh.

True. I utilized the mega backdoor for several years and appreciate that it existed, but it was always a very blatant loophole that we should not be surprised is going away.

moneymatters242

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Re: New Roth IRA limitations proposed today
« Reply #94 on: September 24, 2021, 05:19:36 PM »
Will anyone think of the average mega backdoor Roth Joes?

The point, which evidently seems to have gone over some people's heads like a 747, is that this legislation which was likely designed to punish the uber rich creates negative impacts on those that are anything but rich, especially mustachians with frugal spending and thus high savings rates.  A family with an income almost as low as the 50th percentile could still have benefited from the mega backdoor Roth if they had extremely frugal spending habits.  If that doesn't fit your definition of the "average Joe", I don't know what does, but it doesn't change the facts of the situation. 

And this is the inherent nature of most legislation with the goal to target the rich.  It creeps over time and ends up creating collateral damage to groups that were never the target.  This one just happens to save some time and do it early.  The federal income tax when it was introduced in the early 1900s had a top marginal rate of 7% that applied to people with an income in today's dollars of $14M.  Now, a person with any income above $0 is subject to a 10% marginal rate.  Personally, I'm okay with legislation that help someone richer than me prosper when it helps me too, but evidently some people don't care about collateral damage (including to themselves) so long as they get an opportunity to stick it to those filthy evil rich.  I'm grateful the poison of envy doesn't cloud my mind.
« Last Edit: September 24, 2021, 05:36:56 PM by moneymatters242 »

Gronnie

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Re: New Roth IRA limitations proposed today
« Reply #95 on: September 24, 2021, 06:21:15 PM »
Completely agree.

It seems a lot of things to target those darn rich people really ends up being pitting the upper middle class against the middle class against the poor, leaving the truly rich alone.

Paul der Krake

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Re: New Roth IRA limitations proposed today
« Reply #96 on: September 24, 2021, 08:07:09 PM »
Completely agree.

It seems a lot of things to target those darn rich people really ends up being pitting the upper middle class against the middle class against the poor, leaving the truly rich alone.
https://www.kitces.com/blog/biden-american-families-plan-bill-proposed-increase-tax-capital-gains-retirement-reform/

I see plenty of stuff in there that most definitely impacts the ďtrulyĒ rich.

New capital gains tax. New surcharge. Limitations on section 199A, trusts, estate deductions. And even a section about mega retirement accounts that looks like a direct attack on the famous Thiel maneuver.

ixtap

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Re: New Roth IRA limitations proposed today
« Reply #97 on: September 24, 2021, 08:57:50 PM »
Will anyone think of the average mega backdoor Roth Joes?

The point, which evidently seems to have gone over some people's heads like a 747, is that this legislation which was likely designed to punish the uber rich creates negative impacts on those that are anything but rich, especially mustachians with frugal spending and thus high savings rates.  A family with an income almost as low as the 50th percentile could still have benefited from the mega backdoor Roth if they had extremely frugal spending habits.  If that doesn't fit your definition of the "average Joe", I don't know what does, but it doesn't change the facts of the situation. 

And this is the inherent nature of most legislation with the goal to target the rich.  It creeps over time and ends up creating collateral damage to groups that were never the target.  This one just happens to save some time and do it early.  The federal income tax when it was introduced in the early 1900s had a top marginal rate of 7% that applied to people with an income in today's dollars of $14M.  Now, a person with any income above $0 is subject to a 10% marginal rate.  Personally, I'm okay with legislation that help someone richer than me prosper when it helps me too, but evidently some people don't care about collateral damage (including to themselves) so long as they get an opportunity to stick it to those filthy evil rich.  I'm grateful the poison of envy doesn't cloud my mind.


I would love to see the percentage of people making $63,000 who even have access to a MBR, much less actually take advantage of it.

This proposal would bring the actual rules more inline with the stated restrictions and eliminate something that depended largely on the luck of the draw for W2 employees.



Gronnie

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Re: New Roth IRA limitations proposed today
« Reply #98 on: September 24, 2021, 09:00:11 PM »
Just get rid of 401ks and income limits and let everyone put $X (hopefullly at least $40-$50k) in an IRA.

None of this should be based on employment luck.

boarder42

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Re: New Roth IRA limitations proposed today
« Reply #99 on: September 25, 2021, 04:57:56 AM »
Just get rid of 401ks and income limits and let everyone put $X (hopefullly at least $40-$50k) in an IRA.

None of this should be based on employment luck.

Completely agree with this. But the premise that this bill kills mustachians is wrong. It lowers the price of the ACA and gets rid of the cliff it also gives more targeted money to parents and people.looking to buy EVs. Losing mbdr for the ACA alone is worth it 10 fold for people who plan to retire early.