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Ask Ed Slott: How Safe Are Roth IRAs?
Friday, March 15, 2013
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I have read your books and watched a couple of your seminars. It made sense for me to convert our IRAs to Roth IRAs, which we did in 2010, and paid the taxes in 2011 and 2012. Unfortunately, I am reading and hearing on an almost daily basis that the government is going to start going after private retirement accounts. In your opinion, how safe are our Roth IRAs from some type of government interference?† It would certainly seem unfair to tax Roth IRAs again since the contributions have already been taxed.

One of the reasons that some people wonít convert their IRA money to a Roth IRA is that they donít trust the government to keep the tax-free deal. While Congress has the right to change the rules, if they ever did, they would likely grandfather or exempt existing accounts from the new rules. In addition, the only funds in a Roth IRA that could be taxed would be the earnings in the account.

We are considering the "Stretch" process for the future of our IRAs.† Does it look to you that Congress may eliminate this?† Also, who will enforce and carry out our stretch wishes when we're gone?

The stretch process for taking death distributions from retirement plans using the beneficiaryís single life expectancy is in the tax law. While we cannot predict the future, it seems highly unlikely that Congress would eliminate it. It is up the beneficiary of the account to follow all the IRA rules once they inherit the account.

Have a question for Ed Slott? Please send your mailbag questions to†mailbag@irahelp.com†and we'll†pick several to answer each Friday.

(3) Comments
If banks and brokerage houses can fudge their numbers like JP Morgan admitted in Senate testimony yesterday how can you as a financial advisor be confident in the advice you are giving to clients?
Posted by Joe C | Saturday, March 16 2013 at 5:25PM ET
great blog i liked it a lot a great deal in finincial investment was quiet troubled before reading it but now i m satisfied thankyou for such post it incremented my finincial thinking
Posted by tasha123 s | Friday, April 12 2013 at 5:00PM ET
I do not really trust our government much any more, especially in the sense of keeping the tax-free deals, still I see a number of advantages in the Roth IRA versus a traditional one, though still consider the option to choose. I have plan to cover some of my current debts, including the one from personal money service and to set up a retirement plan for myself. Thanks.
Posted by Jull S | Friday, January 24 2014 at 12:31PM ET
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