Rothification

Have you heard the term Rothification. Are you tracking what all is going on with the tax reform discussion in Washington and how that will potentially impact you and your family ?

 I am a member of the National Association of Insurance and Financial Advisors ( NAIFA ) an organization that advocates for the insurance and financial services industry as it relates not just to agents and advisors but also our clients. Yes, you and your family benefit from the good work that NAIFA lobbyists do in D.C.

 As always there is give and take, right ? Tax cuts must be compensated for in other areas.

 One area under consideration would be to limit deductible IRA’s.  There have been proposals to limit pre-tax contributions to anywhere from $2,000 to $10,000 a year.  NAIFA’s position, and my personal position, is that we believe those limits will “harm overall retirement readiness and severely limit the choices of employers and plan participants”.

 Additionally, small business owners may decide that there is less advantage to sponsoring retirement plans for their employees who could simply set up Roth IRAs for themselves.

 As stated in a recent NAIFA article :

Rothification is not tax reform. It would simply shift around numbers on the government’s ledger, so that future tax revenues would be available to pay for tax cuts today. In effect, it is robbing future governments and American citizens of needed revenue years down the road. That would be a shameful act.

 What do you think ?