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Could anything be done if the government just decides that people are earning too much tax-free money and starts taxing Roth IRA withdrawals out of the blue?
Seems like there is just no downside to this great investment vehicle, so it wouldn't surprise me if the government tried to get rid of it one day.
Could anything be done if the government just decides that people are earning too much tax-free money and starts taxing Roth IRA withdrawals out of the blue?
Seems like there is just no downside to this great investment vehicle, so it wouldn't surprise me if the government tried to get rid of it one day.
The downside is that it's capped at only $5,500 for the year for a single person under 50 and that there is no match and that the money is already taxed.
I agree it's a great investment vehicle, I max mine out every year.
The downside is that it's capped at only $5,500 for the year for a single person under 50 and that there is no match and that the money is already taxed.
I agree it's a great investment vehicle, I max mine out every year.
Roth 401k has $18k+ cap
Plus $5,500 Roth IRA (essentially no income limit right now, with the backdoor Roth)
The only thing that I can see is instituting some sort of VAT tax like in Canada, basically a national sales tax, that would effectively tax Roth withdrawals. Will it be done? Maybe yes maybe no. However never discount the ability of the government to complicate things that aren't complicated.
The government can decide to do anything it wants and one thing they fiddle with a lot is tax law. But I really doubt they would mess with Roth. It would not get through congress for one thing.
I doubt there will ever be an explicit tax on Roth withdrawals. But I expect we'll see at least an attempt to include them in things like qualifying for ACA credits.
the money was already taxed in advance . if they ever tried to tax it a 2nd time all credibility on anything the gov't does would go up in smoke .
in short i think there is no chance since it was already taxed .
I disagree. There's no telling what the government will do. If they do decided to go after Roths, they'll do it in a sneaky, roundabout way per hikernut's example above.
there really won't be much they will do with roths because they want that tax money up front .
if they screw with them game is over for them .
in fact they want that tax money up front so bad that a few years ago they even gave you two years to pay the taxes on any conversions . they since ended that but they know a lot of that deferred money will be spent down in lower tax brackets .
the states want that money also since many folks move to no or low tax states in retirement so the states lose also .
i do see one change though they could make but i don't have a problem with it .
that is after 70-1/2 any new gains get taxed just like happens in a deferred account when you start to take rmd's . if you reinvest the rmd money any new gains are now taxed . i can see them doing that to the roth . as of now no money after 70-1/2 is taxed .
Yes
Remember you pay taxes on your Social Security contributions and depending on your taxable income you pay tax on the Social Security payments you receive
Sure they could. It wouldn't work out in the favor of anyone, but that has never stopped them from doing stupid things before.
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