No. of Recommendations: 0
I'm 27 and seriously considering converting my regular IRAs to Roths. How do I know whether the tax free withdrawal provision written into the Roth IRA Law will still be in effect in 30+ years? The regular IRA used to be tax deductible for everyone, now deductability is based on income. Who's to say whether congress will remove the tax deferred growth from the Regular IRA. Are there rules written into their respective laws that prohibit congress from doing such things? Where's my guarantee????
Print the post Back To Top
No. of Recommendations: 0
xxdustyxx wrote:

I'm 27 and seriously considering converting my regular IRAs to Roths. How do I know whether the tax free withdrawal provision written into the Roth IRA Law will still be in effect in 30+ years? The regular IRA used to be tax deductible for everyone, now deductability is based on income. Who's to say whether congress will remove the tax deferred growth from the Regular IRA. Are there rules written into their respective laws that prohibit congress from doing such things? Where's my guarantee????

I reply:

There was a fairly extensive discussion on this question involving Rayvt, TMFTaxes, and myself, among others, on the Tax Strategies board about a month ago. Try a search on "retroactive" or "retroactivity." --Bob
Print the post Back To Top
No. of Recommendations: 0
Greetings, xxdustyxx, and welcome. You wrote:

I'm 27 and seriously considering converting my regular IRAs to Roths. How do I know whether the tax free withdrawal provision written into the Roth IRA Law will still be in effect in 30+ years? The regular IRA used to be tax deductible for everyone, now deductability is based on income. Who's to say whether congress will remove the tax deferred growth from the Regular IRA. Are there rules written into their respective laws that prohibit congress from doing such things? Where's my guarantee????

Since when did your mama promise you a rose garden? <g> Congress can and frequently does change the rules of the games we play. It's solely within the discretion of our elected representatives. Invariably, though, the changes are made prospectively, not retroactively. Therefore, IMHO if you have a Roth in place prior to any changes enacted by the Congress, then that Roth will be grandfathered under present rules. The subject of what that "esteemed" body will do in the future as it pertains to the Roth IRA has been discussed ad nauseum in this folder and in the Tax Strategies folder, as have the various aspects of converting tradtional IRAs to that vehicle. Do a thread search for the last six months in either folder and you will see literally hundreds of messages on the topics you raise.

Regards…..Pixy

Print the post Back To Top
No. of Recommendations: 0
<<I'm 27 and seriously considering converting my regular IRAs to Roths. How do I know whether the tax free withdrawal provision written into the Roth IRA Law will still be in effect in 30+ years? The regular IRA used to be tax deductible for everyone, now deductability is based on income. Who's to say whether congress will remove the tax deferred growth from the Regular IRA. Are there rules written into their respective laws that prohibit congress from doing such things? Where's my guarantee???? >>

Good questions, and right on point. Too bad more people don't think about them.

<<Are there rules written into their respective laws that prohibit congress from doing such things? >>
This can't be done. No Congress can bind a future Congress; no law can be set up in such a manner that it cannot be changed in the future.

Our best guide to the future is to look at the past. Human nature does not change, nor does the nature of people who run governments. A few thousand years of recorded history says that the government is ready, willing, and able to tax/take money away from people at the drop of a hat.

This has been well discussed before. My opinion is this: There are three possible outcomes.
1) Pay taxes in the future instead of now (don't convert).
2) Pay the taxes now, on the assumption that you won't have to in the future (convert).
3) Pay taxes now, AND pay taxes in the future. (Convert, and then they change the rules sometime in the next 30 years.) "WHAT?? You mean they would *lie* to us??? Change the rules in the middle of the game???"

You can't control what the government does in the future (heck, we can't even control what it does now!). But you can control whether or not you pay taxes now.
Print the post Back To Top
No. of Recommendations: 0
xxdustyxx wrote:
<<I'm 27 and seriously considering converting my regular IRAs to Roths. How do I know whether the tax free withdrawal provision written into the Roth IRA Law will still be in effect in 30+ years? The regular IRA used to be tax deductible for everyone, now deductability is based on income.>>

Worse, now you can be hit with fairly punitive taxes on IRA withdrawals - and they also have rules which _force_ withdrawals, so you can make the choice between being punished for saving too much, or being punished for not withdrawing enough!

I tend to agree with those that think that in the withdrawal phase of a Roth-IRA, it's pretty unlikely that you'll be taxed, since that would be double-taxation. Against that theory, we have taxation of SSC benefits.

All of which leads me to my main assumption - that I can't assume anything about things so far in the future (I'm only 29). So my wife and I are putting $2k towards our Roth this year since income prevents us from using a regular IRA. But our rollover and SEP IRAs will continue as they are.

If things stay _exactly_ as they are for the next 60 years, we can expect to live off our non-Roth IRAs, paying taxes, while leaving a tiday tax-free sum to our heirs via the Roth. If Congress screws up the Roth, well, so be it.

[And you never know - what with all those baby boomers soon to start dipping into their IRAs, perhaps Congress will change the distribution phase of the non-Roth IRA for the better. Stranger things have happened.]

Later,
scott
Print the post Back To Top
No. of Recommendations: 0
Who's to say whether congress will remove the tax deferred growth from the Regular IRA. Are there rules written into their respective laws that prohibit congress from doing such things? Where's my guarantee????

In the same place as the quarantee that Social Security would never be taxed.....
Print the post Back To Top