Taken together, Democrats’ reforms aim to erode the use of retirement accounts as a perceived tax shelter for the wealthy and instead promote them as a way for low- and middle-income Americans to build a nest egg. Most of the changes would start in 2022.
Wealthy individuals with retirement accounts exceeding $10 million would be prohibited from contributing extra savings and would have a new required minimum distribution each year. This tact would have the effect of accelerating retirement capital into the tax stream.
The bill would also repeal so-called Roth conversions in individual retirement accounts and 401(k)-type plans for those making more than $400,000 a year. It would also prevent savers from using the “mega-backdoor Roth” strategy, regardless of income level.
Further, the legislation would prohibit individual retirement accounts from holding investments that require buyers to be accredited investors, a status generally reserved for wealthy investors.
It’s time to take stock of the risks
Does it seem like you’re getting hit from all sides? Inflation, market volatility, real estate prices, and the politicization of just about everything. And, coming soon, tax increases and a less accommodative Fed. It’s time to take stock of the risks and headwinds the US economy is facing and start thinking about how to keep what you’ve earned.
A solid strategy to mitigate market risk
Senior life settlements are a defensive alternative asset class that can help protect your capital from the erosive effects of market bubbles, economic implosions, global event risk and tax ravenous legislators…for now. It’s not easy to make gains when your stocks and properties are still going up but it’s easier than forgiving yourself for not harvesting profits when you could have. Having capital allocated to non-correlated, absolute return assets is a solid strategy to mitigate market risk.
There’s a new battle plan brewing in Washington to attack the few remaining tax advantages wealthy Americans still have to protect and grow their money. Waiting around to see what happens could be costly.