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What if Backdoor Roth goes away?

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  • Hatton
    replied
    Tax laws change all the time.  I think going forward this blog and forum will stay up to date with significant changes.  The issue that scares me is rmds being required on roths or putting a limit on the total value of retirement accounts. In general it is better to wait and see what actual laws pass.

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  • Zaphod
    replied
    It may go away but it doesnt make a lot of sense as it pulls forward tax revenues they otherwise wouldnt get. Its probably hard for them to to give that up.

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  • Jim
    replied




    Many will regret excessive early spending; few will regret excessive early saving.

     
    Click to expand...


    Oh, if only I could get my wife to think this way!

     

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  • The White Coat Investor
    replied
    I expected to never contribute to a Roth IRA again after 2010. So it's all bonus to me anyway.

     

    I wouldn't pay much attention to the president's proposed budget. A bigger issue for docs in those budgets is the proposed $57K limit to PSLF.

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  • jfoxcpacfp
    replied



    Yeah, that's from last February. Lots of "experts" have been predicting a second market crash since 2009, too. At some point, they will be right. In the meantime, I still say get as much as you can in a Roth by whatever means wherever possible and invest according to a plan.

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  • TheGipper
    replied
    Elimination of backdoor Roth has been proposed many times by Obama, has support of congressional Dems, and is not a priority of congressional Rs to oppose.  Its days could be numbered.

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  • PhysicianOnFIRE
    replied
    From Michael Kitces: President’s Budget Proposes Elimination Of Backdoor Roth, Stretch IRA, and Step-Up In Basis At Death!

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  • MochaDoc
    replied
    In response to Rex, in case this comment winds up someplace wonky:

    Random but "Live Like You Were Dying" is a great song. Words to live by.

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  • DMFA
    replied




    A better question may be should we still do our backdoor Roths in January or early in the year, if there is a decent chance it will be disallowed in 2017.  Will this force a non-desirable re-characterization back into a non-deductible traditional IRA and a permanent paperwork headache?  If this is likely, should we wait till later in 2017 to do our backdoor Roths?
    Click to expand...


    I think it would be unlikely that any law passed on the subject would be effective immediately.

    Where's this fear coming from?  Are there rumblings that the IRS are trying to do away with the non-deductible re-characterization?  Or is it just because it's "too good to be true?"

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  • TheGipper
    replied
    A better question may be should we still do our backdoor Roths in January or early in the year, if there is a decent chance it will be disallowed in 2017.  Will this force a non-desirable re-characterization back into a non-deductible traditional IRA and a permanent paperwork headache?  If this is likely, should we wait till later in 2017 to do our backdoor Roths?

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  • Hatton
    replied
    Also you can save with no limits in a taxable account.  You also have the flexibility to withdraw money at a younger age if you get burned out.

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  • jfoxcpacfp
    replied
    POF - so agree with your closing statement. I have yet to meet the person who has told me (s)he regrets saving so much in their early years. Many, many others wish the opposite.

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  • PhysicianOnFIRE
    replied
    Don't fear the taxable account. A slight majority of all my investments are in a taxable account. If you stick with tax-efficient funds (total market, S&P 500, total international) your funds will grow with a tax drag of about 0.3% to 0.6% depending on your capital gains tax rate (which includes state income tax).

    Depending on your tax bracket in retirement, you may be able to avoid paying taxes on the gains later on. See here and here.

    Also, some unsolicited advice: You may assume you're ~25 years from retirement, but you might be thinking differently as you and your job evolve over the years. I would aim to save more than 20% to give yourself options in case circumstances change.

    Ask anyone who has been around awhile. Many will regret excessive early spending; few will regret excessive early saving.

    Best wishes,

    -PoF

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  • jfoxcpacfp
    replied

    1. No reason to give up your HSA, but I would recommend you stop spending it and invest for the long term.

    2. You can get up to $53k into separate 401k's/403b's at each non-related employer but you cannot contribute over $18k employee contributions to all accounts combined.

    3. Not sure what you mean about "Anything else?"

    4. If backdoor Roth's go away, we will deal with it then, same as we will if TIRAs go away, if the marginal tax rate is doubled, or if Congress decides to do away with tax deductions for charitable contributions or mortgage interest. We cannot build a plan on the myriad "what if's" but based only upon what we know today. (But, yes, almost anything is preferable to a whole life insurance policy.)

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  • VagabondMD
    replied
    Or if the Backdoor Roth loophole goes away, should I just open a taxable account and adhere to the efficient tax practices delineated in other WCI / Bogleheads articles?

    Yes!

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