Author Topic: New Roth IRA limitations proposed today  (Read 15993 times)

ender

  • Walrus Stache
  • *******
  • Posts: 6912
Re: New Roth IRA limitations proposed today
« Reply #150 on: November 24, 2021, 10:22:12 AM »
Schwab's legislative expert described the changes that are heading to the Senate.  The mega backdoor Roth is prohibited.  The $10 million limit on IRAs is delayed a decade, so it has no effect until 2031.  While unrelated to this thread, the state and local tax (SALT) exemption rises from $10k to $80k, which is likely controversial.  New York and California have population based representation in the House, but only 4% of the Senate.  If the legislation moves quickly, maybe the $80k SALT exemption will be dropped but the IRA and Roth changes remain.

I will gladly give up the megabackdoor for this.

For FIRE chasing folks, megabackdoor is not that meaningful - if you make enough to consistently max it out, your timeline to FIRE is probably pretty short (or you are spendypants I guess) and you likely also pay more than 10k in SALT taxes as it is so the benefit there likely outweighs the cost associated with capital gains on any taxable investments you do instead of megabackdoor.


MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5222
Re: New Roth IRA limitations proposed today
« Reply #151 on: November 24, 2021, 02:32:18 PM »
Schwab's legislative expert described the changes that are heading to the Senate.  The mega backdoor Roth is prohibited.  The $10 million limit on IRAs is delayed a decade, so it has no effect until 2031.  While unrelated to this thread, the state and local tax (SALT) exemption rises from $10k to $80k, which is likely controversial.  New York and California have population based representation in the House, but only 4% of the Senate.  If the legislation moves quickly, maybe the $80k SALT exemption will be dropped but the IRA and Roth changes remain.
I will gladly give up the megabackdoor for this.

For FIRE chasing folks, megabackdoor is not that meaningful - if you make enough to consistently max it out, your timeline to FIRE is probably pretty short (or you are spendypants I guess) and you likely also pay more than 10k in SALT taxes as it is so the benefit there likely outweighs the cost associated with capital gains on any taxable investments you do instead of megabackdoor.
By controversial, I assume the expert meant unlikely to pass.  So my guess is there is no change to SALT exemption (still $10,000) and the mega backdoor Roth is also gone.  There's a lot more representatives from CA + NY, who passed the bill, than there are CA + NY Senators.

FIPurpose

  • Handlebar Stache
  • *****
  • Posts: 1856
  • Location: WA
    • FI With Purpose
Re: New Roth IRA limitations proposed today
« Reply #152 on: November 24, 2021, 03:21:35 PM »
Schwab's legislative expert described the changes that are heading to the Senate.  The mega backdoor Roth is prohibited.  The $10 million limit on IRAs is delayed a decade, so it has no effect until 2031.  While unrelated to this thread, the state and local tax (SALT) exemption rises from $10k to $80k, which is likely controversial.  New York and California have population based representation in the House, but only 4% of the Senate.  If the legislation moves quickly, maybe the $80k SALT exemption will be dropped but the IRA and Roth changes remain.
I will gladly give up the megabackdoor for this.

For FIRE chasing folks, megabackdoor is not that meaningful - if you make enough to consistently max it out, your timeline to FIRE is probably pretty short (or you are spendypants I guess) and you likely also pay more than 10k in SALT taxes as it is so the benefit there likely outweighs the cost associated with capital gains on any taxable investments you do instead of megabackdoor.
By controversial, I assume the expert meant unlikely to pass.  So my guess is there is no change to SALT exemption (still $10,000) and the mega backdoor Roth is also gone.  There's a lot more representatives from CA + NY, who passed the bill, than there are CA + NY Senators.

Whatever they change will still have to pass the house. My guess is that the SALT exemption is dropped to the 20-40k range.

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 6586
  • Age: 37
  • Location: Seattle, WA
    • My blog
Re: New Roth IRA limitations proposed today
« Reply #153 on: November 24, 2021, 05:16:07 PM »
Yeah they don't have much room for error in passing this bill. No Republican will vote for it. That means every Democratic-caucusing senator needs to vote in favor, and all but a handful of Democrats from the House. Doesn't really matter that New York and California only have two senators apiece; each of those senators' votes is essential. I wouldn't be surprised to see the cap negotiated down some from $80k but that seems like something that those senators could make sure is increased at least somewhat. The backdoor Roth...I'm not sure what constituency it really has to support it, but on the other hand it has a pretty minimal impact on the bill's finances. Who can say what will happen. It's sausage factory time.

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5222
Re: New Roth IRA limitations proposed today
« Reply #154 on: November 25, 2021, 07:49:02 AM »
Another clarification, the $1.75 trillion "R.A.I.S.E. Grant" has already passed the House.  Now it needs to pass the Senate through budget reconciliation.  The Democrats only have 50 votes, so they need everyone and a tie-breaking VP vote to pass it.

secondcor521

  • Magnum Stache
  • ******
  • Posts: 4538
  • Age: 53
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: New Roth IRA limitations proposed today
« Reply #155 on: November 25, 2021, 12:10:26 PM »
Another clarification, the $1.75 trillion "R.A.I.S.E. Grant" has already passed the House.  Now it needs to pass the Senate through budget reconciliation.  The Democrats only have 50 votes, so they need everyone and a tie-breaking VP vote to pass it.

And of course, the Senate either needs to pass the House version, or any Senate changes need to go back to get another vote in the House.  The latter seems more likely to me now, but I'm just a mouse in the peanut gallery.

VaCPA

  • Bristles
  • ***
  • Posts: 270
Re: New Roth IRA limitations proposed today
« Reply #156 on: December 28, 2021, 05:48:38 AM »
The Bill is dead for now, thanks to Manchin

achvfi

  • Bristles
  • ***
  • Posts: 362
  • Location: Midwest
  • Health is wealth
Re: New Roth IRA limitations proposed today
« Reply #157 on: December 30, 2021, 01:19:23 PM »
For now mega backdoor Roth is still alive and we dont know for how long. So I was thinking I should continue to take advantage of this as much as possible going into 2022.

So my thought is to start the year, contribute as much as employer match amount to pre tax and remaining to after tax to be converted to backdoor immediately. (My employer has certain percentage limit on our paycheck contributions towards 401k).

Later if mega back door ends in few months my limit to 401k contribution will go back to $20500(pre tax or roth) and I can continue higher than usual contributions for rest of the year.

Anyone has thoughts on this?

secondcor521

  • Magnum Stache
  • ******
  • Posts: 4538
  • Age: 53
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: New Roth IRA limitations proposed today
« Reply #158 on: December 30, 2021, 01:29:18 PM »
It's a revenue raiser, so whenever the federal government needs to raise revenue, it will likely be on the table in some form as an option that they will consider.  I doubt Congress will write a more complicated version which only ensnares backdoor Roth contributions and MBDRs and lets people with after-tax traditional IRA contributions off the hook.

One of the provisions related to this had an effective date of 12/31/2021.  Since that is tomorrow, that won't happen.  If I had to guess, I'd say that if the provision passes in 2022 they'll change the effective date to 12/31/2022.  So IMVHO there will be one more full year to do these things.

Beyond that, I think it will depend on the political calculations going into, and then the results of, the midterm elections next fall.  Which in turn will probably depend heavily on how 2022 as a year is going.

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5222
Re: New Roth IRA limitations proposed today
« Reply #159 on: January 01, 2022, 04:31:46 AM »
I'd agree with blaming Senator Manchin months ago, but I would call the December fiasco a failure of the Democratic leadership.  How did they underestimate Senator Manchin's demands and resolve?  Why didn't they have a safe backup bill to pass through budget reconciliation?

Now we're in 2022 (Happy New Year!), and the "build back better" bill depends on avoiding the mistakes of 2021.  Joe Manchin's son owns a coal plant, with many of his voters relying on coal for their jobs.  If Democrats try to push anything related to green energy, they'll fail.  Another pitfall is the cost.  Joe Manchin quoted the CBO estimate of $4.6 trillion for the BBB bill (1), more than twice what Democrats claimed it would cost.  If Democrats don't treat the CBO numbers with respect, they will fail to get the bill passed in 2022.  So BBB isn't dead, but it's not looking good.

(1) "The non-partisan Congressional Budget Office determined the cost is upwards of $4.5 trillion which is more than double what the billís ardent supporters have claimed"
https://www.manchin.senate.gov/newsroom/press-releases/manchin-statement-on-build-back-better-act

chasesfish

  • Magnum Stache
  • ******
  • Posts: 3880
  • Age: 40
  • Location: South Carolina
Re: New Roth IRA limitations proposed today
« Reply #160 on: January 01, 2022, 05:48:42 AM »
I'd agree with blaming Senator Manchin months ago, but I would call the December fiasco a failure of the Democratic leadership.  How did they underestimate Senator Manchin's demands and resolve?  Why didn't they have a safe backup bill to pass through budget reconciliation?

Now we're in 2022 (Happy New Year!), and the "build back better" bill depends on avoiding the mistakes of 2021.  Joe Manchin's son owns a coal plant, with many of his voters relying on coal for their jobs.  If Democrats try to push anything related to green energy, they'll fail.  Another pitfall is the cost.  Joe Manchin quoted the CBO estimate of $4.6 trillion for the BBB bill (1), more than twice what Democrats claimed it would cost.  If Democrats don't treat the CBO numbers with respect, they will fail to get the bill passed in 2022.  So BBB isn't dead, but it's not looking good.

(1) "The non-partisan Congressional Budget Office determined the cost is upwards of $4.5 trillion which is more than double what the billís ardent supporters have claimed"
https://www.manchin.senate.gov/newsroom/press-releases/manchin-statement-on-build-back-better-act

The country needs leadership.  Democrats and Republicans keep playing these budget games with frontloaded benefits and backloaded revenue, knowing the benefits won't go away and the revenue will continue to be deferred.   Someone has to stop this madness, instead of acting like six year olds and justifying bad behavior by pointing to other bad behavior.   Republicans take the tactic of cutting taxes to "starve the budget" while Democrats promise all these services with token but inadequate funding mechanisms.

Nobody is willing to have an adult conversation about the need to raise taxes across the board to pay for the services already committed.  Medicare payroll taxes only bring in 40% of expenses.  If you want a European style social services, it requires European style payroll taxes and a sales/VAT revenue.

I'm not as upset with Manchin as I am with his former governors colleagues with (Ds) after their name like Hassan, Warner, and Hickenlooper who know better than to continue this madness.   They're letting their counterpart take all the bullets because he's primary proof. 

Gronnie

  • Bristles
  • ***
  • Posts: 475
  • Age: 36
  • Location: MN
Re: New Roth IRA limitations proposed today
« Reply #161 on: January 01, 2022, 01:36:35 PM »
Started my 2022 Backdoor Roth today. I figure even if/when it passes, it won't be retroactive.

joe7886

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: New Roth IRA limitations proposed today
« Reply #162 on: January 22, 2022, 07:14:08 AM »
i'm going to try my first backdoor Roth for 2021 prior to April filing date and also do a 2022 backdoor with the hopes of any changes in the law will not be retroactive.

1. I used to do direct Roth contributions until my income increased in 2021. i have been and continuing mega back door contributions for 2022, capped at 10% by employer so $ amount isn't an issue.
2. I don't currently have a traditional IRA

My plan is to open an IRA account, contribute a 2021 non deductible amount and not invest in anything, just leave as cash. I then roll it over to my Roth.I'll repeat the process again for 2022. Is there anything i'm missing for pitfalls?

The trad IRA doesn't have to be invested correct? i'm only going to have a cash balance for a day before rolling it over.
Is there any issues for having the initial contribution to the trad IRA and the rollover be done in such a short period of time?



secondcor521

  • Magnum Stache
  • ******
  • Posts: 4538
  • Age: 53
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: New Roth IRA limitations proposed today
« Reply #163 on: January 22, 2022, 08:07:01 AM »
@joe7886:

Pitfalls - if you do invest inside the traditional IRA, the amount you convert to the Roth may be a bit higher or lower than your original contribution.  I forget how this is handled tax-wise, but there are some minor tax consequences.

The traditional IRA doesn't have to be invested.  Note that depending on your IRA custodian, they may sweep your contribution into a money market settlement fund, which usually pays some interest.  Depending on your contribution amount, how long you leave the money there and what the interest rate is, you may end up getting paid a couple of pennies in interest.  Which will result in the aforementioned minor tax consequences.

Are there any issues with a quick backdoor Roth?  Some people think so - I think the argument is that you're, in a way and based on the step transaction doctrine, violating the Roth contribution AGI limit.  Because the loophole has been widely known for years and I have never heard of someone actually getting in trouble with the IRS for doing it, I don't personally agree with that viewpoint.

shuffler

  • Pencil Stache
  • ****
  • Posts: 523
Re: New Roth IRA limitations proposed today
« Reply #164 on: January 22, 2022, 08:28:54 AM »
Are there any issues with a quick backdoor Roth?  Some people think so - I think the argument is that you're, in a way and based on the step transaction doctrine, violating the Roth contribution AGI limit.  Because the loophole has been widely known for years and I have never heard of someone actually getting in trouble with the IRS for doing it, I don't personally agree with that viewpoint.
It's fine.  There were a couple clarifications of its legitimacy in 2018.
https://www.forbes.com/sites/ashleaebeling/2018/01/22/congress-blesses-roth-iras-for-everyone-even-the-well-paid/?sh=7f0317374715
https://www.forbes.com/sites/jeffreylevine/2018/07/13/irs-unlocks-the-door-for-high-income-savers/?sh=229eb1ca326c

Pitfalls - if you do invest inside the traditional IRA, the amount you convert to the Roth may be a bit higher or lower than your original contribution.  I forget how this is handled tax-wise, but there are some minor tax consequences.

The traditional IRA doesn't have to be invested.  Note that depending on your IRA custodian, they may sweep your contribution into a money market settlement fund, which usually pays some interest.  Depending on your contribution amount, how long you leave the money there and what the interest rate is, you may end up getting paid a couple of pennies in interest.  Which will result in the aforementioned minor tax consequences.
Pennies don't matter.
If it becomes a dollar or more, you'll owe a small amount of tax.  It works out just fine.
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/

terran

  • Magnum Stache
  • ******
  • Posts: 3725
Re: New Roth IRA limitations proposed today
« Reply #165 on: January 22, 2022, 08:34:15 AM »
Sounds like you have a good handle on it. You could also contribute both 2021 and 2022 and then convert them both at the same time, no need to do separate conversions as the conversion is reported on Form 8606 in the year you make it (2022) not the year the contribution was for (2021 and 2022).

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5222
Re: New Roth IRA limitations proposed today
« Reply #166 on: January 22, 2022, 08:40:49 AM »
I'm not as upset with Manchin as ...  They're letting their counterpart take all the bullets because he's primary proof.
Looking at wikipedia's summary of his past elections, you're right about that.  I assumed a Democrat in a heavily Republican state would need independent voters, but I guess not.

There's an attempt now to create a smaller bill to replace BBB.  That could include Roth provisions while catering to areas Manchin will support... or they might make the same mistakes as last year.  The saga continues... until the end of 2022, when Republicans will very likely take control of the Senate and end any attempts to pass BBB.

joe7886

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: New Roth IRA limitations proposed today
« Reply #167 on: January 23, 2022, 02:41:14 PM »
thanks

joe7886

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: New Roth IRA limitations proposed today
« Reply #168 on: February 08, 2022, 12:25:03 PM »
Sounds like you have a good handle on it. You could also contribute both 2021 and 2022 and then convert them both at the same time, no need to do separate conversions as the conversion is reported on Form 8606 in the year you make it (2022) not the year the contribution was for (2021 and 2022).

There's another wrinkle. I'm still partially qualified for a direct Roth contribution due to income, let's say it's 1,000. Do i have to do a direct contribution for the 1,000 and the remainder through the conversion? It's not an issue for 2021 but i won't know what i qualify for in 2022. I'd prefer to just put it in in the trad IRA and then convert it all.

EvenSteven

  • Pencil Stache
  • ****
  • Posts: 813
  • Location: St. Louis
Re: New Roth IRA limitations proposed today
« Reply #169 on: February 08, 2022, 12:53:15 PM »
Sounds like you have a good handle on it. You could also contribute both 2021 and 2022 and then convert them both at the same time, no need to do separate conversions as the conversion is reported on Form 8606 in the year you make it (2022) not the year the contribution was for (2021 and 2022).

There's another wrinkle. I'm still partially qualified for a direct Roth contribution due to income, let's say it's 1,000. Do i have to do a direct contribution for the 1,000 and the remainder through the conversion? It's not an issue for 2021 but i won't know what i qualify for in 2022. I'd prefer to just put it in in the trad IRA and then convert it all.

No need to split it up, you can do the full amount as an after tax traditional contribution followed by conversion at any income level.

joe7886

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: New Roth IRA limitations proposed today
« Reply #170 on: February 09, 2022, 10:09:31 AM »
Thanks

glancep

  • 5 O'Clock Shadow
  • *
  • Posts: 4
Re: New Roth IRA limitations proposed today
« Reply #171 on: February 20, 2022, 03:11:20 PM »
So have everyone continued with MBR into 2022?  I was meeting with a financial advisor at the end of 2021, and his suggestion was to hold off.  I asked him in January after it was clear that BBB had stalled, and he said his advice was still to hold on it.  For various reasons, I'd prefer not to keep plowing money into my taxable account... but I am somewhat concerned about MBR/conversion changes being made retroactive. 

Any thoughts on the likelihood of this, and if so, the ramifications had someone already made conversions?  Thanks!

secondcor521

  • Magnum Stache
  • ******
  • Posts: 4538
  • Age: 53
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: New Roth IRA limitations proposed today
« Reply #172 on: February 20, 2022, 03:23:25 PM »
So have everyone continued with MBR into 2022?  I was meeting with a financial advisor at the end of 2021, and his suggestion was to hold off.  I asked him in January after it was clear that BBB had stalled, and he said his advice was still to hold on it.  For various reasons, I'd prefer not to keep plowing money into my taxable account... but I am somewhat concerned about MBR/conversion changes being made retroactive. 

Any thoughts on the likelihood of this, and if so, the ramifications had someone already made conversions?  Thanks!

My opinion FWIW:

1.  I doubt this provision will pass in 2022.
2.  In the unlikely scenario where this provision passes in 2022, I doubt they will make it retroactive simply because to do so would create a nightmare for people who had already done backdoor Roths or MBRs.  It's also not a very big revenue generator, so the impetus to make it retroactive isn't very high.

So overall I think the chances of it being an issue are quite low.

If I were concerned, I might wait until later in 2022 or even early 2023 to take action.  This would work OK with the backdoor Roth; with the MBR option you'd have to decide if you're OK with the contributions just sitting there in the after-tax segment of your 401(k) if the MBR is retroactively eliminated.  Offhand it would seem to me that after-tax 401(k) contributions are generally better than taxable unless the fees or investment options are really bad.

Gronnie

  • Bristles
  • ***
  • Posts: 475
  • Age: 36
  • Location: MN
Re: New Roth IRA limitations proposed today
« Reply #173 on: February 20, 2022, 11:30:35 PM »
I did backdoor Roths for my wife and I immediately at the beginning of the year, and am continuing on with mega backdoor as usual. I find it highly doubtful any changes would be retroactive.
« Last Edit: February 21, 2022, 01:21:04 PM by Gronnie »

trc4897

  • 5 O'Clock Shadow
  • *
  • Posts: 87
Re: New Roth IRA limitations proposed today
« Reply #174 on: February 21, 2022, 12:01:31 PM »
We have also been plowing money into my wife's MBR in 2022. Assuming this will be the last year it is allowed, so want to max it out one last time!

ixtap

  • Magnum Stache
  • ******
  • Posts: 3727
Re: New Roth IRA limitations proposed today
« Reply #175 on: February 21, 2022, 06:44:45 PM »
We have also been plowing money into my wife's MBR in 2022. Assuming this will be the last year it is allowed, so want to max it out one last time!

We will start with this week's paycheck and bring home zero until DH leaves megacorp, as we expect this to be the last time we have it available, no matter what happens legislatively.

trc4897

  • 5 O'Clock Shadow
  • *
  • Posts: 87
Re: New Roth IRA limitations proposed today
« Reply #176 on: February 22, 2022, 06:17:04 AM »
We have also been plowing money into my wife's MBR in 2022. Assuming this will be the last year it is allowed, so want to max it out one last time!

We will start with this week's paycheck and bring home zero until DH leaves megacorp, as we expect this to be the last time we have it available, no matter what happens legislatively.

Do you usually contribute the max so that the take home pay is zero? Or just because he is leaving the company soon? Either way, very impressive!

Last year my calculations were slightly off for the first MBD contribution so DW's first paycheck was $0. She took it well and likes to give me a hard time about it now, lol. But we usually aim for ~$300 take home pay for her biweekly paychecks.

ixtap

  • Magnum Stache
  • ******
  • Posts: 3727
Re: New Roth IRA limitations proposed today
« Reply #177 on: February 22, 2022, 08:41:32 AM »
We have also been plowing money into my wife's MBR in 2022. Assuming this will be the last year it is allowed, so want to max it out one last time!

We will start with this week's paycheck and bring home zero until DH leaves megacorp, as we expect this to be the last time we have it available, no matter what happens legislatively.

Do you usually contribute the max so that the take home pay is zero? Or just because he is leaving the company soon? Either way, very impressive!

Last year my calculations were slightly off for the first MBD contribution so DW's first paycheck was $0. She took it well and likes to give me a hard time about it now, lol. But we usually aim for ~$300 take home pay for her biweekly paychecks.

We usually don't have enough take home pay to cover expenses while contributing, but this will be the first time we go down to zero. In 2021, we took a break between deferrals and after tax contributions, in order to replenish the coffers for a big vacation. Just depends what else we have going on, but this year he insists he wants the MBR, even if it means we sell some equities to make it through.
« Last Edit: February 24, 2022, 07:01:50 AM by ixtap »

goodmoneygoodlife

  • 5 O'Clock Shadow
  • *
  • Posts: 54
    • Good Money Good Life
Re: New Roth IRA limitations proposed today
« Reply #178 on: February 24, 2022, 06:49:21 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

DadJokes

  • Handlebar Stache
  • *****
  • Posts: 2288
Re: New Roth IRA limitations proposed today
« Reply #179 on: February 24, 2022, 06:52:05 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

Make less money? :D

Turtle

  • Stubble
  • **
  • Posts: 102
Re: New Roth IRA limitations proposed today
« Reply #180 on: February 24, 2022, 08:59:30 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

Make less money? :D

Coast FIRE part time job that you enjoy?

sonofsven

  • Pencil Stache
  • ****
  • Posts: 903
Re: New Roth IRA limitations proposed today
« Reply #181 on: February 24, 2022, 09:12:59 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

Make less money? :D
Ha, that's always been my "strategy". There's only one downside.

dividendman

  • Handlebar Stache
  • *****
  • Posts: 1462
Re: New Roth IRA limitations proposed today
« Reply #182 on: February 24, 2022, 09:54:00 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

You can do the regular backdoor, but only $6k a year (or whatever the max IRA contribution is). You just contribute post-tax money into a regular IRA, then convert it to Roth.

secondcor521

  • Magnum Stache
  • ******
  • Posts: 4538
  • Age: 53
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: New Roth IRA limitations proposed today
« Reply #183 on: February 24, 2022, 10:15:07 AM »
Without mega backdoor, are there any other workarounds to toss money into Roth IRA?

You can do the regular backdoor, but only $6k a year (or whatever the max IRA contribution is). You just contribute post-tax money into a regular IRA, then convert it to Roth.

It has been a bit since I looked, but IIRC the proposed law that would eliminate MBR also would eliminate regular backdoor Roths.

MustacheAndaHalf

  • Walrus Stache
  • *******
  • Posts: 5222
Re: New Roth IRA limitations proposed today
« Reply #184 on: February 25, 2022, 06:32:37 AM »
This quote from Biden makes no sense: "I think we can break the package up"
https://www.eenews.net/articles/biden-resets-bbb-i-think-we-can-break-the-package-up/

Maybe some of my assumptions are wrong:
(1) Only one bill per year can be passed through budget reconciliation
(2) With budget reconciliation, a 50/50 split allows the Vice President to break the tie
(3) All other bills are up against a filibuster, needing 60 votes when 50 Republicans will vote against it

If they break it up, one bill could pass through reconciliation while the rest will be blocked by filibuster.  Midterms often favor the party out of power (Republicans), and Biden's popularity has weakened in his first year.  Everything points to Democrats losing seats in the Senate, after which they can't even pass anything through reconciliation.

The most pressing issue is climate change, but any climate bill is dead on arrival.  Machin earns more from his son's coal company than from his government salary.  He's going to keep objecting, and that objection prevents reconciliation.

So they can't even get their biggest priority through.  I don't think BBB will be passed, and at best some fraction of it might get through in a much smaller bill.  Which also means I think the IRA provisions will be dramatically different than the original BBB bill.

trc4897

  • 5 O'Clock Shadow
  • *
  • Posts: 87
Re: New Roth IRA limitations proposed today
« Reply #185 on: February 25, 2022, 12:14:24 PM »
This quote from Biden makes no sense: "I think we can break the package up"
https://www.eenews.net/articles/biden-resets-bbb-i-think-we-can-break-the-package-up/

Maybe some of my assumptions are wrong:
(1) Only one bill per year can be passed through budget reconciliation
(2) With budget reconciliation, a 50/50 split allows the Vice President to break the tie
(3) All other bills are up against a filibuster, needing 60 votes when 50 Republicans will vote against it

If they break it up, one bill could pass through reconciliation while the rest will be blocked by filibuster.  Midterms often favor the party out of power (Republicans), and Biden's popularity has weakened in his first year.  Everything points to Democrats losing seats in the Senate, after which they can't even pass anything through reconciliation.

The most pressing issue is climate change, but any climate bill is dead on arrival.  Machin earns more from his son's coal company than from his government salary.  He's going to keep objecting, and that objection prevents reconciliation.

So they can't even get their biggest priority through.  I don't think BBB will be passed, and at best some fraction of it might get through in a much smaller bill.  Which also means I think the IRA provisions will be dramatically different than the original BBB bill.

Thanks for the update! Regardless of how everyone in this thread feels about BBB overall, I think most of us will be pretty happy that it seems unlikely the IRA provisions will pass. DW and I don't make nearly enough to have to worry about the regular backdoor roth, but maxing out the MBD roth the last 2 years has been pretty awesome in regards to setting us up well for early retirement.