Nifty Retirement Tools That May Not Be Around Forever

Below are three retirement savings loopholes that may be here today, gone tomorrow. Tomorrow of course being in 10 years when legislation manages to get passed in our gridlocked government.  Don’t panic, but just be aware that just because something is in the tax code today, doesn’t mean that it will be allowed forever.

  1. Back-door Roth contributions for people over the income limits.  Currently, a person who makes too much money to contribute to a Roth IRA annually can get around this by contributing to a Traditional IRA and then immediately converting that money to Roth.  Roth conversions are allowed no matter what your income is.  This loophole is one the current administration would like to close.
  2. The stretch IRA.  Allowing the generation below the original saver to slowly take money out of an inherited IRA can provide a tax benefit to the wealthy that is not intended.  Getting rid of this option has more bi-partisan support than the Roth IRA loophole.  Future generations may have to take IRA money inherited from parents out quickly and pay a larger tax bill soon after inheriting the IRA account.
  3. Social Security file-and-suspend and other strategies that benefit two-income earners.  Strategies that allow one spouse to collect a small Social Security benefit while waiting for their own to grow to its maximum at age 70 can be a great way to maximize a couple’s total benefits.  However, with Social Security facing funding shortfalls, these would be an easy thing for Congress to axe and keep more money in the Social Security system.

Source:  “Three Retirement Loopholes That are Likely to Close Soon” by Alex Padalka,

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