Taxation of IRA balances

My client heard a vicious story “on television” that the balance of IRA plans may be taxed by the federal government in the future. Has anyone heard anything about this.



There are all sorts of bizarre rumors floating around. Since traditional IRA balances will be taxed upon distribution anyway, this story probably was referring to Roth IRAs.
Even if Congress did away with Roth IRAs, which is not going to happen, they would have to grandfather existing balances at the time. If things ever got so bad that Congress had to attack Roth IRAs after promoting Roth conversions like they have been, we would all have more problems to worry about than our Roth IRAs, and any Congressman who voted for these bills would have a very short political career.

The most likely threat I can envison at this time would be a value added (sales) tax, adopted to supplement the income tax. While this would not destroy Roth IRAs, it would dilute the value of Roth assets since distributions taken to pay for things would then be subject to the VAT tax. This devalues Roth IRAs somewhat vrs traditional IRAs, since any VAT tax would be in lieu of yet higher ordinary income taxes.



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