On Mar 5, 5:58 pm, Tad Borek <bore...[at]pacbell.net> wrote:
- quote -

I don't know the US tax system, but the other area I can think of is
if there is a 'fudging' eg of the AMT.

beliavsky[at]aol.com wrote:
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I just read that piece this morning, I thought it was fluffy - just
speculation about how Roths might be taxed. He omitted the most obvious
one: "Roth IRA distributions considered taxable income."

Fluffy though because it lacked context -- any reference to tax-law
changes in the past, or to proposed changes (perhaps because, as someone
pointed out, the author is described as a marketing guy, not a tax
policy wonk). I can't think of precendents for random, retroactive taxes
like "Roths over $1 milion hit with excise tax." Closing loopholes, yes
(eg limited partnership taxation), but retroactively imposing an excise
tax on a carve-out created by Congress? In an area with as much policy
wound into it as retirement savings?

One of his examples I do think is plausible...that wealthier people will
have less access to entitlement programs, and all assets (including
tax-sheltered assets held in Roth IRAs) may figure into benefit
calculations. But that's not a Roth-specific issue really.

-Tad

In article <pmb-0403072025270001[at]max1ka-86.his.com> ,
pmb[at]his.com (Paul Michael Brown) wrote:

- quote -

[Said by many politicians of both parties]

"We will not raise taxes"! -- "Yea say the masses!"

"We have closed some loopholes that allowed the greedy rich people to
take advantage of the system!" -- "Yea say the masses!"

--
-Ernie-

On Mar 4, 3:58 am, Logan Shaw <lshaw-use...[at]austin.rr.com> wrote:
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I've been seeing more viewpoints along these lines. People will debate
pre-tax, after-tax, and compare different programs for eternity. But
the results will vary dramatically depending on the assumptions that
are made (who really knows how tax laws will change in 50 years). I've
come to the conclusion that if you are a more conservative investor
that wants stability, rather than put all your eggs in one basket,
it's a great idea to diversify across tax strategies (types of
retirement plans) too. That way, regardless of tax changes, you'll
still be ok.

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:f4udnT5rZNY8-HbYnZ2dnUVZ_riknZ2d[at]comcast.com...
- quote -

You may shred your tax documents, but does the IRS? The 5498 data including
Roth contributions is reported to the IRS, so that's how the they could
track down your information. As to how you would dispute the IRS figures,
well, that's your problem :-)

Even under the current law, you can be subject to taxes and/or penalties on
withdrawal of earnings from a Roth. So you already have a reason that you
should keep track of contributions (at least until you are over 59.5 and
five years past your first Roth contribution).

As to why the IRS requires you to report cumulative non-deductible
contributions to a traditional IRA but not to a Roth, I feel that it is not
so much to simply add up numbers (which is the same trivial exercise in
either case), but to properly pro-rate the withdrawals between contributions
and earnings for the traditional IRA. You don't have this pro-rating
calculation with Roths.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

Elizabeth Richardson <erichktn[at]worldnet.att.net> :

- quote -

Mr. McQuarrie speculated that Congress might be tempted to "encourage"
RMDs in a variety of ways. See Barrons for details. He notes "once enough
people parlay their IRAs inot a family fortune, some politician will rise
up against the evils of tax-free inherited wealth." He envisions backlash
against "obscene accumulations of dynastic wealth." Finally, he says that
young workers are probably better off taking the tax break now and
contributing to a traditonal 401(k) account. Bird in the hand and all
that.

Mr. McQuarrie's dark ruminations about how future politicians might target
those who prudently saved during their working years to close a budget
deficit tempts me to set forth some type of screed on misplaced
priorities. But I'm sure Skip would prefer me to post that over in
alt.politics.

Mark Freeland wrote:

- quote -

I thought about this. Nondeductible IRA money is tracked so
contributions are not taxed again. If congress did decide to tax Roth
growth only, how would 'basis' ever be tracked down? Tax returns happily
get shredded 3 years after due date, and no basis tracking was required
for Roths.
JOE

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:j9CGh.99293$5j1.22226[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

Interesting question, since I've been thinking that this is more likely than
taxing Roths. Consider that the "contract" that Congress has made with
taxpayers is that they don't get (income-)taxed twice. But IMHO there is no
similar promise that Roths are "forever". In fact, since Roths, boiled
down, are just pre-paid IRAs, anything else about them can be viewed as
technical details, subject to change (such as 5 year requirement on
conversions was tightened up after the government realized its sloppy
crafting). Also, it's not as though there are no RMD requirements on Roths;
there are, but only for inherited Roths.

For those who would bring up Social Security - "only" 85% is subject to tax,
based on the argument that the growth has not been taxed already, only the
original "contribution". So it would not shock me to see Roth earnings
taxed, but not the original contributions. Taxing Roth contributions is
about as likely as taxing non-deductible traditional IRA contributions. (In
fact, if Roth earnings are taxed, you're simply back to a non-deductible
IRA.)

Finally, note that one of the items in the article is a backdoor way of
getting at RMD - taxation on excess accumulations. How do you avoid excess
accumulations? Take distributions - implied RMDs.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

Elizabeth Richardson wrote:
- quote -

I was about to add to this thread by remarking that the author (of the
Barrons story, not the thread OP) Edward McQuarrie is not a Barrons
writer, his comments appear on the "other voices" page in Barrons. Also,
he's a professor of marketing, not finance.
But then I looked at his web page,
http://lsb.scu.edu/~emcquarrie/freeadv.htm
and found he suggests not investing in gold or variable annuities, so he
gains credibility right there.

I think it would be political suicide for any congress to pass laws
reversing the benefits of existing Roths. I think the tinkering with
retirement plans (aside from annual increases to deposit caps, and
income cut-offs rising) causes more confusion in the average consumer's
mind, and too many choices create a frustration resulting in bad choices
or worse, no choice, made. They want to call it quits on new deposits,
so no new Roths at some point, I can accept, although that would be a
shame. But in any way, having Roths trigger other taxes to go up is just
wrong. The continued tax-free status of inherited Roths was also sold to
the people as a feature, and for many, it's part of their estate
planning. When we reply to others posting here, do we now have to add
the warning "if the Roth continues to enjoy its tax free status"? Don't
we have enough trouble keeping track of all the assumptions/exclusions
already?
JOE

<beliavsky[at]aol.com> wrote in message
news:1172935999.394013.41840[at]s48g2000cws.googlegroups.com...

- quote -

While I fully recognize the non-taxability of Roth earnings is very
attractive, I consider that feature to be lesser than it's immunity from
RMDs. Does anyone question this feature will not be maintained? Does anyone
think Congress will add RMDs to Roths if/when it adds back taxes?

Elizabeth Richardson

beliavsky[at]aol.com wrote:
- quote -

Personally, I don't believe it will happen, but then you never know.

When it comes to financial planning, I'm an amateur at best, but this is
why I like somewhat the idea of doing some of both traditional and Roth
IRAs (or both 401(k) and Roth IRA): the theory is that which one is
best depends on circumstances, and it depends on assumptions about
how the laws will be in the future, so if the circumstances make it
mostly a wash which is best, it could be beneficial to do a little bit
of both. That way, if some change comes that affects how one or the
other works, it probably only affects you half as much as someone who
put everything into one or the other.

- Logan

beliavsky[at]aol.com writes:

- quote -

[snip]

They missed an obvious one -- making making qualified
Roth distributions an AMT preference item.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Below are excerpts from a Barron's article warning of possible tax
increases, in the long run, on Roth IRAs, making traditional
dedectible IRAs more attractive by comparison.

Barron's, March 5, 2007
"Breaking Faith on Savings Is Very Easy"
By Edward F. Mcquarrie

The idea that Congress will never change today's Roth provisions for
the worse, for the rest of your life and the life of your heirs',
requires more faith than reason.
[...]
Consider just a few ways a future Congress, hungry for revenue, might
renege on that promise of "tax-free forever."
Congress decides to include Roth distributions in the definition of
"modified adjusted gross income."
[...]
Congress revokes the tax-free status of Roth distributions after the
death of the initial Roth account holder and spouse.
[...]
Congress imposes an excise tax on "excess" Roth accumulations -- a
nice round number like $1 million.
[...]
Congress sets a deadline after which excess distributions from a Roth
account -- more than $100,000 a year is a likely number -- will be
included in ordinary income and taxed at your regular rate.
[...]
Once enough money accumulates in Roth accounts, Congress may simply
tire of seeing such enormous amounts of wealth escape the tax system.
It could "close the loophole," simply by sunsetting the Roth after a
certain date.
[...]
A better choice for that young person may be to accept the tax subsidy
right now to reduce the expense of a contribution to a traditional
401(k)-type plan. The subsidy can easily exceed 40% in a high-tax
state. That's a bird in the hand, much to be preferred to the dubious
promise of "tax-free forever."