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The state of Social Security and public pension is pretty concerning. If the government runs out of money, is there any chance they will collect the taxes that people saved through retirement accounts? What legal/constitutional barriers are there to prevent this from happening?
The state of Social Security and public pension is pretty concerning. If the government runs out of money, is there any chance they will collect the taxes that people saved through retirement accounts? What legal/constitutional barriers are there to prevent this from happening?
People are going to pay taxes on that money eventually. That's what RMDs are for.
The point being that the government can't do anything additional with them (unless you are saying you think they will start requiring Roth accounts to have RMD's as well, at least forcing reinvestment into taxable accounts?)
The point being that the government can't do anything additional with them (unless you are saying you think they will start requiring Roth accounts to have RMD's as well, at least forcing reinvestment into taxable accounts?)
My point is you've already paid income tax on the roth hence the lack of RMD.
they could do an income max for contributions so less "rich" people can contribute. if there was an emergency and they needed the money, id imagine they could start by "borrowing" the money from 401k accounts. they could do a forced conversion, its not like they are taking money that isnt "owed" to them anyway. but thats getting into worse disaster territory (there may not be much to take at that point).
they are probably already borrowing against your 401k money in some manner.
My point is you've already paid income tax on the roth hence the lack of RMD.
Ok, but consider what happens after a longer period of time, say at age 95 if the account owner lives that long. In the case of the Traditional account, the money is taxed when it comes out in RMD's. If the account owner wants to reinvest, this goes into a taxable account. So this money, now after-tax money, has earnings on it taxed. The end result is that due to taxes, the sum will be reduced to even less than (1-T) * (what it would have been otherwise), where T is the tax rate.
In the case of Roth accounts, the taxes are truly paid only on the money going in. Absent RMD's, the account owner always has (1-T)*(what the value would be absent the taxes).
This is therefore an advantage of the Roth which persists even if the tax rates were the same at the time of contribution and post-retirement.
Having RMD's would make the playing field more level.
Ok, but consider what happens after a longer period of time, say at age 95 if the account owner lives that long. In the case of the Traditional account, the money is taxed when it comes out in RMD's. If the account owner wants to reinvest, this goes into a taxable account. So this money, now after-tax money, has earnings on it taxed. The end result is that due to taxes, the sum will be reduced to even less than (1-T) * (what it would have been otherwise), where T is the tax rate.
In the case of Roth accounts, the taxes are truly paid only on the money going in. Absent RMD's, the account owner always has (1-T)*(what the value would be absent the taxes).
This is therefore an advantage of the Roth which persists even if the tax rates were the same at the time of contribution and post-retirement.
Having RMD's would make the playing field more level.
This is all irrelavant to the post your originally responded to and thus I quoted you on.
Outside of that can you tell me if my tax rate at 95 will be higher/lower than the 28% marginal rate I'm at now?
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