Roth IRAs: A real 'fiscal Frankenstein'
In establishing Roth IRAs, Congress waived untold billions in future Treasury receipts. It's time to retire them.
By Gerald E. Scorse
LA Times
April 10, 2011
The day after Congress passed the new healthcare law, an opponent called it "a fiscal Frankenstein." In fact, those are fitting words for Roth individual retirement accounts, or IRAs. Roths drive up the federal deficit and cause other pain. They're great for holders but grim for America. It's time to retire them.
Retirement accounts were designed by Congress to spur saving by Americans for their golden years. Let's compare a Roth IRA to other accounts, such as traditional IRAs, 401(k)s or 403(b)s.
In the other accounts, contributions are tax deductible and nest-eggs grow tax-free until money is withdrawn. Payouts can begin at age 59 1/2; they must begin after age 70 1/2 and be taken annually thereafter, and they're fully taxable. The accounts strike a two-way bargain: years of tax deferral and deductions, followed by years of taxpaying withdrawals.
Then, in 1997, Congress created the Roth IRA.
(More here.)
By Gerald E. Scorse
LA Times
April 10, 2011
The day after Congress passed the new healthcare law, an opponent called it "a fiscal Frankenstein." In fact, those are fitting words for Roth individual retirement accounts, or IRAs. Roths drive up the federal deficit and cause other pain. They're great for holders but grim for America. It's time to retire them.
Retirement accounts were designed by Congress to spur saving by Americans for their golden years. Let's compare a Roth IRA to other accounts, such as traditional IRAs, 401(k)s or 403(b)s.
In the other accounts, contributions are tax deductible and nest-eggs grow tax-free until money is withdrawn. Payouts can begin at age 59 1/2; they must begin after age 70 1/2 and be taken annually thereafter, and they're fully taxable. The accounts strike a two-way bargain: years of tax deferral and deductions, followed by years of taxpaying withdrawals.
Then, in 1997, Congress created the Roth IRA.
(More here.)
Powered by Blogger
2 Comments:
Just so I understand,… Scorse is attempting to make the case that allowing citizens to keep more of their money creates a monster. That type of thinking scares me.
On a slightly different income tax program, Minnesota should re-evaluate its tax-avoidance treatment of standard 401k plans.
Today, Minnesota tax law allows the 401k amount to be deducted from ordinary income in computing the taxable wage … which is the same as the Federal law. The problem is that the Federal law requires distribution to begin later (when you are in your 70s) … and then would be considered in your taxable income in those years, so potentially at sometime it becomes part of your taxable earnings … the same treatment occurs when computing your Minnesota State Income Tax … except what happens if you move to another state (or establish your “winter” home as your taxable state), then Minnesota gets nothing.
Minnesota should include 401k deductions in the AGI calculation now, and allow distributions to be tax-free.
Post a Comment
<< Home