Question: Regarding Roth IRA conversions, what is there to prevent the government years from now taking these Roth IRAs and changing rules and making them taxable or making them subject to the AMT?
For Immediate Release
April 22, 2010
Question: Regarding Roth IRA conversions, what is there to prevent the government 10, 20 or 30 years from now taking these Roth IRAs and changing rules and making them taxable, either all or in part, or making them subject to the AMT?
Ric: There is nothing preventing Congress from doing that. That is one of our objections to the Roth IRA and specifically to the Roth IRA Conversion.
Congress says Roth IRA withdrawals are tax-free, but we get a new Congress every two years. Planning to retire in 20 years? That’s 10 Congresses from now.
If the government needs more revenue, a future Congress might decide to tax the money held in Roth accounts. You can even argue that this is why Congress allows Roth conversions in the first place: The conversion does not necessarily lower your taxes, but it does accelerate your payment of them. By getting you to convert, Congress gets the tax revenue now. Clever, huh?
Do you trust Congress to honor its promises? The more you do, the more confident you can be about putting money in the Roth IRA. Personally, I am not terribly confident.