This One Retirement Savings Strategy Will Be No More

retirement strategy

Americans may soon no longer be able to utilize a popular retirement strategy that helps shelter their savings from taxes in retirement.

Little by little, the few financial instruments we do have to help us work towards a more sound financial future are being stripped away.

When House Democrats passed the Build Back Better bill, contained in the proposal were multiple tax legislations said to specifically target the wealthy by amending certain retirement plan rules and regulations.

However, the term wealthy is being loosely thrown around without significant context being applied.

The retirement legislation changes contained in this bill will certainly not just affect the wealthy so to say.

In fact, the activities that they aim to eliminate are ones that citizens from every tax bracket have been leveraging in their financial strategies for decades.

Beginning January 1, 2022, the legislation would prohibit the use of a type of Roth conversion known as the mega-backdoor Roth conversion.

Wise savers may already be aware of this strategy. The Wall Street Journal describes it simply:

The mega-backdoor Roth conversion allows anyone with a 401(k) plan to contribute up to $58,000 of post-tax dollars into the account and convert a certain amount into a tax-free Roth account, likely with a minimal tax hit.

This is, by all means, a legal and valid method used by many hard-working, taxpaying Americans to not skip out or avoid taxes, but rather pay instant taxes on those contributions rather than waiting years to do so.

If anything, individuals who leverage this strategy are helping to contribute instant capital to the US economy.

Especially now, when inflation levels have reached highs not visited in 30 years, and the masses are passing new tax bills, this method may be needed now more than ever.

In a sense, it “almost” feels as if the current Washington staff is trying to force us into eventually paying higher taxes to help pay for their “Build Back Better” genius plan they have brewing.

The bill would also cancel the opportunity to utilize backdoor Roth conversions of after-tax contributions of as much as $6,000 to traditional IRAs, (or up to $7,000 for those 50 years and older.)

This strategy is often used by those who aren’t eligible to make Roth IRA contributions. That means single individuals with incomes above $140,000 and married couples making more than $208,000 will soon be out of luck.

Additionally, regular Roth conversions would still be allowed, that is until 2032. They would then be considered to be off-limits for people with higher incomes.

What retirement tools will be attacked next?

Many individuals are seeking alternative strategies to help make up for these losses even more now.

Call American Hartford Gold at 800-462-0071; we can help you plan.

Get Your Free 2024 Guide
Most Recent News