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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsBudget Deal Lets More Savers Switch to Roth 401(k): Taxes
http://www.bloomberg.com/news/2013-01-03/budget-deal-lets-more-savers-switch-to-roth-401-k-taxes.htmlU.S. workers willing to take tax pain today in exchange for tax-free gains on earnings in their 401(k) retirement accounts later have a new avenue to do so.
The budget legislation passed by Congress Jan. 1 lets 401(k) participants convert any money in their tax-deferred accounts to a so-called Roth 401(k) account, if their employer offers one, which can be withdrawn tax-free in retirement. The change is projected to raise $12.2 billion in revenue over 10 years, according to the Joint Committee on Taxation, and help defray the cost of delaying spending cuts that had been set to take effect this month.
This dramatically expands the number of participants who can use this provision, said Bob Holcomb, executive director of legislative and regulatory affairs for JPMorgan Chase & Co. (JPM)s retirement plan services. It will allow any amount to be transferred.
The conversion opportunity can benefit people with significant balances, the up-front money to pay taxes now with funds outside their retirement account and years of tax-free earnings ahead of them or their heirs. Conversions to Roth 401(k)s had been limited to certain funds and to plans that allowed the switches. The law opens the opportunity to more workers who hold $5 trillion in employer-sponsored defined contribution plans including 401(k)s.
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Budget Deal Lets More Savers Switch to Roth 401(k): Taxes (Original Post)
xchrom
Jan 2013
OP
GeorgeGist
(25,321 posts)1. When the other shoe drops ...
"The new opportunity gives a tax cut to the wealthy and will cost the government in the future, Robert Greenstein, founder and president of the Center on Budget and Policy Priorities wrote yesterday. The Washington-based center is a group favoring policies that benefit low-income households.
Every dollar of that $12 billion is revenue that the federal Treasury would have collected in subsequent decades, Greenstein wrote in a post on the centers website. The resulting revenue loss in later decades will be substantially greater than $12 billion -- probably several times that amount.
Same source.
djean111
(14,255 posts)2. Quelle surprise!