What’s Your “Take” on Roth Conversions?

You may have missed it, but there’s a bit of a kerfuffle of late about Roth conversions.

The trouble began shortly before the Independence Day holiday when ProPublica published an article lengthily titled, “Lord of the Roths: How Tech Mogul Peter Thiel Turned a Retirement Account for the Middle Class Into a $5 Billion Tax-Free Piggy Bank.” Thiel is founder of PayPal (he’s also said to be a Lord of the Rings fan, hence the reference), and the report claims that, “over the last 20 years, Thiel has quietly turned his Roth IRA” (which the article characterizes as “a humdrum retirement vehicle intended to spur Americans to save for their golden years) … into a gargantuan tax-exempt piggy bank,” citing confidential IRS data. Basically that his retirement account worth less than $2,000 in 1999 is now a $5 billion “windfall.”

Thiel isn’t the only billionaire mentioned in the article. Others with enormous Roth IRA accounts include Warren Buffett ($20.2 million) and hedge fund manager Randall Smith ($252.6 million).  And now there are a number of folks in Congress looking to do something to prevent this kind of thing[i] from happening. 

But beyond the machinations of millionaires (and billionaires), with retirement looming – and higher tax rates almost certainly on the horizon (certainly for some) – the notion of converting those pre-tax savings to Roth has been, and will surely continue to be, of interest.  It even made it into the Wall Street Journal last week (see A Little-Known ‘Back Door’ Trick for Boosting Your Roth Contributions).

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* 1. Do the plan(s) you work with currently allow for in-plan Roth conversions?

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* 2. Have you discussed adding/implementing in-plan Roth conversions with the plans you work with?

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* 3. Are Roth conversions something you are currently promoting as a strategy to participants with which you work?

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* 4. Thoughts on Congress moving to prevent the kinds of "abuse" cited with Roth conversions?

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* 5. Other comments on Roths, Roth conversions, "abuses" of Roth, whether taking advantage is actually an "abuse", the need for Congress to intervene, the prospects for Congress to intervene, the dangers if Congress does intervene, or life in general?

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* 6. What is your role working with retirement plans?

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* 7. What size plans do you PRIMARILY work with?

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* 8. Suggestions for future survey questions?  Seriously - what would you like to know about/from your fellow NAPA-Net readers?  Or what would you like to be asked?

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* 9. All responses are confidential, of course - but just in case you would like a response - or want me to know you responded - or just want to say hi - here's your chance to do so (don't forget your email)!

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