Here’s a link to the tax plan. Backdoor Roth, mega backdoor Roth, after-tax contributions to employee accounts, pre-tax to Roth conversions for > $400k income (starting in 2032, I think), all gone.
Tax-advantaged retirement assets can’t accrue above $10m. If they do, half of the amount above 10m has to be withdrawn. If the total is > $20m, any Roth accounts have to be drained first.
If this part had been in place when Mitt Romney was doing his thing for his kids’ IRAs, they would have had to sell half. Not sure whether they were Roths - probably. If I’m reading it right, you will no longer be able to put stuff like venture capital shares or partnerships in an IRA. That account ceases to be an IRA at that point (starting in 2 years, for accounts that currently have such assets).
I’m not sure, but it would make sense that after-tax contributions are no longer allowed. The only reference to 457s that I’ve seen is one person stating that he will stay in a government job instead of moving to the private sector. So,
Getting rid of backdoor Roths seems like an objectively good thing, but of course it has to come right when me and the rest of my generation is finally making enough money to take advantage of it after watching previous generations take advantage of it for years. Same with affordable college, same with housing prices, same with… ugh.
Looks to me like all mega backdoor Roths gone in 2022 for all income levels. Regular backdoor Roths gone in 2022, but only for incomes greater than $400k.
Edit: Actually, I’ve now read 3 articles and they all seem written to cause maximum confusion and sometimes conflict with each other. It seems regular Roth conversions will still be allowed until at least 2032, but then they may totally phase out or only phase out at certain income levels. Mega backdoor Roths would be gone for all income levels, but I read confusing/conflicting info about when that would start.
Probably best to wait and see how it all shakes out before bothering to try to figure it out. I’ll support whatever they can do to moderately raise taxes on middle and upper class, and more than moderately (lol like that will happen) on the truly wealthy.
I’m actually fine with nuking mega backdoor Roths, that’s a huge loophole and it’s not available to everyone. Really the whole concept of tax advantaged accounts is dumb, and so is treating investment income differently than any other kind of income.
I think I misunderstood. If you are currently able to contribute to a 457 plan, and those funds are after-tax, and then can be rolled into a Roth, that should not be changing.
What is changing is the option to contribute after-tax funds beyond the 19.5k limit
The backdoor Roth (converting non-deductible/after tax IRA to Roth) would be gone as of 2022. Conversions from pre-tax (401k, for example) would still be available to everyone through 2031. Starting in 2032, conversions would only be available for people below the $400k threshold.
So the $400k threshold only applies to the last item in the list.
BTW, a dirty secret in the retirement industry is that all these tax breaks don’t really improve retirement readiness. The people that are financially savvy enough to appreciate the value of tax incentives largely are already saving and they just move investments from taxable accounts to non-taxable accounts.
Also, we do tax wealth we just tax it extremely inefficiently. Property taxes are wealth taxes its just that people are used to them so they don’t think they’re Dangerous Socialism.
Right. So an idea like a Federal wealth tax should be positioned as a natural extension of the widely accepted idea of a property tax. Capital is “property”.
“But they’ll have to sell at depressed prices if the value goes down!” As if that never happens with real estate, fucking decades of propaganda have rotted the country’s brains.
