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ROTH changes for future...its only the beginning

Don’t Change Tax Plans Based on Presidential Budgets

Posted: 16 Feb 2015 05:00 AM PST

A reader writes in, asking:

“I heard on the radio recently that Obama will be changing IRA rules so that Roth IRAs will require RMDs and so there will be a limit on IRA account size. Do you think this has a big effect on the decision of which type of account to contribute to?”

To be clear, these are proposed changes that were included in the Obama Administration’s budget for the 2016 fiscal year. Every year, the President is required to submit a budget to Congress. And every year, the budget includes a list of tax changes — the nature of which naturally varies depending upon whether a Democrat or Republican is in office.


  • How are you going to rich Roth holders?
  • To be clear I found nothing related specifically to "Roth" IRA's or RMD's (I assume from same) in the linked document from the Tax Foundation.

    The document does address the issue of retirement account caps:

    "Places Limits on Retirement Accounts
    The president’s plan would create a $3.4 million cap on retirement accounts. This means taxpayers would not be able to save in retirement accounts once they reach this limit. Revenue estimate: $26 billion over ten years."

    The author of the obliviousinvestor blog duly noted that prior presidents and/or administrations had also floated the idea of a cap on retirement accounts many times in the past which went nowhere.

    For what it's worth President Obama and the current crop of senators and representatives that will vote on these matters have already been elected so vote any way that you wish.
  • edited February 2015
    @TPA --- Your Roth is only as good as the investments it contains.

    Please don't shoot the messenger ... Sorry this is a few years old ... And correct me if I'm wrong ...
    But doesn't this Fox News report suggest you should vote Democratic?
  • Well that was clear as mud. Somewhat better to go to the source - the budget proposal is linked to by the Tax Foundation page.

    There, the actual proposal says that the purpose is to "close a number of inefficient, unintended, and unfair tax loopholes in the individual tax code. ... It would ... prevent wealthy individuals from using loopholes to accumulate huge amounts in tax-favored retirement accounts. While tax-preferred retirement plans are intended to help middle class workers prepare for retirement, loopholes in the tax system have let some wealthy individuals convert these accounts into tax shelters."

    (This is similar to what the SC said recently when it ruled, unanimously, that inherited IRAs do not also inherit bankruptcy protections - inherited IRAs are no longer retirement funds.)

    The budget proposal goes on to provide slightly more detail: "The Budget would prohibit contributions to and accruals of additional benefits in tax-preferred retirement plans and IRAs once balances are about $3.4 million, enough to provide an annual income of $210,000 in retirement."

    Ambiguities - is the limit a total across all retirement plans (e.g. 401ks and IRAs), or does each plan have its own limit (my read: probably a combined cap)? Since accruals are included in the cap, are distributions mandatory should earnings exceed the cap? Is the cap adjusted for inflation (my guess: yes, given the stated intent).

    A more interesting (to me) IRA tax loophole being closed is backdoor Roth conversions. This loophole was greatly widened when the income limit on Roth conversions was eliminated. The proposal completely shuts this down - Roth conversions would be limited to pre-tax dollars. So you could no longer convert nondeductible contributions - nor could you convert post-tax contributions to 401Ks, as another recent ruling (this one by the IRS) facilitated.
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  • edited February 2015

    Personal attacks? Me? Never! ... Bent over backasswards to locate a conservative news source to reference the earlier point. Nothing more to say on the issue. I think Fox said it pretty well.:)

    Don't know anything about FAIRX. Sorry it's having an off-year. Looks like better than 20% AAR going out 3 or more years. Not bad. That's about 20% a year more than a CD would have paid.

    Conventional wisdom says to invest aggressively in Roths. I disagree a little. They're a very nice way to "leverage" gains if you can start one in a area that's been beaten up and ride the rebound. After that (for us older folks) I prefer trying to protect those tax-free gains a little. The older Roth is now in: DODBX, DODIX, DODLX, OAKBX, RPSIX, and TRRIX.

    Started a new one in QRAAX about 6-8 weeks ago to play the energy & commodities rebound. It's up 5 or 10% since than. When it's up about 25%, I'll begin going conservative with it. There's a 5-year holding period on conversions anyway - so plenty of time to wait.


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  • edited February 2015
    @Maurice - Thanks - but no apology necessary. I really value your insights and the knowledge you bring to the board. I also share your concern that this thread not become personal or overly political as many threads do. I posted the Fox News blurb only tongue-in-cheek - as a deserved response to TampaBay's overtly political pandering.

    I really wish we could move beyond the shouting matches that occasionally errupt here. Things like:

    - Which political party is better?

    - Are my 10 funds better than your 50?

    - Is My fund (A) better than Your fund (B)?

    - Only "losers" own this or that asset. Egads!

    Thanks again. Regards, hank
  • Accused of Pimping or Pandering (Penal Code 266h or 266i PC)? California criminal attorneys explain the laws, punishments and legal defenses:

    Hank I don't live in California, so I'm not worried, but you seem to be a little sensitive.. to life or just opinions.....just wondering?
  • edited February 2015
    "Hank I don't live in California, so I'm not worried, but you seem to be a little sensitive.. to life or just opinions.....just wondering?"

    LOL -:)

    HA! I'm just a reformed rabble-rouser trying to walk the "straight and narrow."
    Food fights, like getting drunk all the time or getting into brawls, get kinda "old" after a while.

    Course - it might be the -10 to -30 degrees F temps Here in Michigan got me feeling cranky.
    Any ice forming out on the Gulf yet TPA?
  • " Then again I find nothing compelling about voting Republican. Both parties are not acting in my interest."

    I hope this thread does not deteriorate into personal attacks. But I unfortunately give the odds better than 50/50. And if it doesn't I will congratulate all posters.

    Well, you can congratulate me right now, because I agree with you. :)
  • I'm voting for Hillary.....a blackman, a woman, be hard to find something new next time, just thinking....Gay?,transgender? what?
  • How about a transgender bisexual black Republican woman? Should be easy to sort through that rather smallish pile.
  • How about just a leader and a Commander in Chief?
  • OK, I'll settle for that too.
  • edited February 2015
    how about:Mrs Obama, after Mrs. Clinton....Liberals would love a blackwomen, that used to be double points for Big Companies hiring minorities(and that's the truth) late 70s early 80s....
    What if two white, rich guys run in 2024, Would liberals/ minorities go back to not voting?
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