taxing roths & 401k's

[Thrif-t]

Does anyone think this will ever actually happen? I was on another board and a poster said congress is considering this. Don't you think if it did happen it would have to be after a certain date and already invested monies would have to be grandfathered in and allowed to be withdrawn tax free? Has anyone else heard about this? It makes me sick if true because we've worked really hard to max out our roths every year.

[disneysteve]

401ks are taxed so you are just referring to Roths. No, I don't think they will ever tax Roth withdrawals. They may eliminate Roths but I think they would grandfather existing accounts. They could also reduce the contribution limit, though it is already pathetically low at $5,000.

[Thrif-t]

oops meant a roth 401k

[kork13]

IMO the most significant "threat" related to taxing Roth's/Roth 401k's would be if America (remarkably) changes to a consumption tax system, similar to what many other countries have. If this were to happen, then the money deposited into those accounts would have essentially been taxed twice (once at deposit under income taxes, again at purchase under the consumption tax).

As to them being taxed under our current income tax structure, I highly doubt it. With the rate that people are getting into them today, the political capital would never be there. For any congressman to vote for (let alone propose) such measures would very effectively end his/her time in Congress. However, I could believe the possibility of what DS mentioned above happening.

[jIM_Ohio]

Roths could make SS get taxed (for example) today. If Roths get taxed, the year before that law takes effect, their would be mass withdraws from them to some other type of account- you can be sure the investment lobby would lobby against it hard.