Self directed IRAs under attack in proposed tax bill • Hacker News Board

Re: Self directed IRAs under attack in proposed tax bill

#211

Post by tylersmith » Thu, Oct 07, 2021, 4:27 PM UTC

nodesocket wrote: post #206

idiotsecant wrote: post #133

Earlier quoted context omitted.

This is the killer, indeed. Checkbook IRAs are amazing retirement tools if you're interested in using some of your retirement money in high-risk, high-reward investments. My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. It's hard to see this as anything other than removing all the peasants from the market so that the big dogs can have it…

> My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. I have a single member LLC and a simplified employee pension plan (SEP), but don't understand how one gets crypto into a SEP without buying something like Grayscale (GBTC) through the open stock market.

The LLC creates an account at e.g. Gemini. Talk with your trustee about it first.

Re: Self directed IRAs under attack in proposed tax bill

#212

Post by the_optimist » Thu, Oct 07, 2021, 4:29 PM UTC

lastofthemojito wrote: post #135

the_optimist wrote: post #26

Earlier quoted context omitted.

The modern 401k laws are a giveaway to the financial industry. They stipulate extraordinary restrictions on what investors can/must _invest_ in and fundamentally transfer tremendous economic power and influence to “advisors” and the financiers attached to them.

The popularization of 401(k) plans (as well as 529 college savings plans, etc) got Main Street on the same page as Wall Street. My parents couldn't have cared less if the stock market tanked. Dad's retirement was a traditional pension, and their savings was in a money market account. Now if the stock market tanks, I watch my retirement account and the kid's college savings plan tank with it. Now that so many of us ar…

This is true. It does align risks much better in the sense that US unions have always been far more antagonist, hyberbolic, and aggressive than their foreign counterparts, which lead to severe impairment/destruction once the protected industries they existed in were exposed to foreign competition. The most powerful unions now, of course, are the public sector unions, which have a similarly deleterious effect but are immune to competition, direct and indirect.

Re: Self directed IRAs under attack in proposed tax bill

#213

Post by nodesocket » Thu, Oct 07, 2021, 4:30 PM UTC

tylersmith wrote: post #211

nodesocket wrote: post #206

Earlier quoted context omitted.

> My retirement fund benefited enormously from the Q3 2020 crypto market gains, which would not have been possible without my LLC. I have a single member LLC and a simplified employee pension plan (SEP), but don't understand how one gets crypto into a SEP without buying something like Grayscale (GBTC) through the open stock market.

The LLC creates an account at e.g. Gemini. Talk with your trustee about it first.

trustee? Lol, it is just me. I thought that crypto exchanges don't let business entities open accounts. If they do, if I open an account at Gemini under my LLC how then do I get that into my SEP though?

Re: Self directed IRAs under attack in proposed tax bill

#214

Post by CPLX » Thu, Oct 07, 2021, 4:31 PM UTC

indymike wrote: post #209

CPLX wrote: post #201

Earlier quoted context omitted.

It doesn't ban anything at all. It just refuses to give you a tax break when you do it.

This is an effective deterrent, and would likely be enforced with a tax penalty. edit: By not allowing me to have the tax benefit, you effectively reduce the incentive to invest in my own business. This seems like a law that is aimed at fat cats that will miss, largely because fat cats aren't going to be investing out of their own retirement. On the other had, my neighbor just used $80K of his 401K to buy three vans…

Deterrent from what, starting a business?

Your theory is that for 250 years America's entrepreneur class has been primarily driven by raiding their own tax-advantaged retirement accounts?

Also if your neighbor story is for real what happened there is he took a loan against his retirement account or did some kind of ROBS transaction. It's already illegal for him to interact with plan assets as part of a self-directed IRA, so he didn't use one to invest in his own business and buy vehicles. Hence this story has nothing to do with the topic at hand.

Re: Self directed IRAs under attack in proposed tax bill

#215

Post by twic » Thu, Oct 07, 2021, 4:32 PM UTC

loourr wrote: post #179

ska wrote: post #150

Earlier quoted context omitted.

Does it restrict you from doing those things, or only restrict you from doing it in a tax-free/tax-advantaged way?

It restricts you from doing them within retirement accounts. But the purpose of retirement accounts is to effectively save for retirement. Congress is basically saying we want you not to need us but we don't actually want you doing well with your investments.

> the purpose of retirement accounts is to effectively save for retirement

Investing in the company which also pays your wages is a Texas hedge, and as such a terrible way to save for retirement, so this sounds like a good change.

Re: Self directed IRAs under attack in proposed tax bill

#216

Post by the_optimist » Thu, Oct 07, 2021, 4:36 PM UTC

lotsofpulp wrote: post #169

joshgachnang wrote: post #93

Earlier quoted context omitted.

Honestly they should close the backdoor Roth and update the Roth income rules to stop requiring the backdoor Roth. It's annoying to use it as is. Getting rid of the mega backdoor seems like a no brainer since it's a clear loophole. Or if you want to keep something similar, change the Roth contribution limits for everyone.

They should close 401k and all other tax advantaged retirement accounts, and just have regular IRA and Roth IRA for everyone, and remove employers from the equation.

This is the best idea. Having employers involved in healthcare and retirement is really crummy. These vestiges of history have been corrupted into massive handouts to the insurance and financial industries, and there is no reason they need to exist.

Re: Self directed IRAs under attack in proposed tax bill

#217

Post by loourr » Thu, Oct 07, 2021, 4:37 PM UTC

2arrs2ells wrote: post #101

mariojv wrote: post #73

I'd recommend reading the proposed provisions themselves directly from the Ways & Means Committee instead of the main article urging action: https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax... Highlights: 1. You can't add new contributions to tax-advantaged accounts if their total value exceeds $10 million and you make over $400K for single filers, amounts indexed to inflation. 2. There are required minim…

Re: revenue generated, if this [1] article about Peter Thiel's $5bn Roth is correct, that's $1bn+ in lost long term capital gains tax on him alone! (That said, I'm guessing the intent of the provision is more about fairness/eliminating a loophole for the wealthy than strictly generating revenue). [1] https://www.propublica.org/article/lord-of-the-roths-how-tec...

Roth IRAs are pre tax so even if this bill passes Peter Thiel won't have to pay any taxes on his $5B.

Re: Self directed IRAs under attack in proposed tax bill

#218

Post by ac29 » Thu, Oct 07, 2021, 4:40 PM UTC

lotsofpulp wrote: post #169

joshgachnang wrote: post #93

Earlier quoted context omitted.

Honestly they should close the backdoor Roth and update the Roth income rules to stop requiring the backdoor Roth. It's annoying to use it as is. Getting rid of the mega backdoor seems like a no brainer since it's a clear loophole. Or if you want to keep something similar, change the Roth contribution limits for everyone.

They should close 401k and all other tax advantaged retirement accounts, and just have regular IRA and Roth IRA for everyone, and remove employers from the equation.

They'd need to raise the limits then - the contribution limits on traditional/Roth IRAs are significantly lower than employer plans like 401ks.

Re: Self directed IRAs under attack in proposed tax bill

#219

Post by loourr » Thu, Oct 07, 2021, 4:42 PM UTC

This will force hundreds of thousands of people who own shares of small businesses within their retirement accounts to disgorge them.

They can't sell them to themselves because that's against the rules. If they distribute them then they have to pay a 10% tax penalty in addition to any income tax.

These are small thinly traded assets. What will very likely happen in practice is big wall street firms will come in and buy up thousands of American small businesses (retirees best assets) at a major discount similar to what Blackstone is currently doing with single family homes.

Re: Self directed IRAs under attack in proposed tax bill

#220

Post by FooBarBizBazz » Thu, Oct 07, 2021, 4:42 PM UTC

selykg wrote: post #8

Loughla wrote: post #3

Earlier quoted context omitted.

Is this really an issue for low- to middle-income earners, or is that just a scare tactic?

This has no impact on the average person in the low to middle class income range. This is just a loophole allowing the rich to put a bunch of money into their IRAs and watch it grow in a tax advantaged way. The average person that's putting the max of $6k (or less) into their IRA is not impacted by this and it's business as usual for them. I believe this is in response to people like Peter Thiel https://www.propublic…

The $6k/yr limit on IRA contributions is a joke. Maybe most "low to middle class people" aren't contributing more than that, but, regardless, if that's all you're doing, you are completely fucked.

The backdoor Roth part of this... basically anybody making even an entry level Tech salary should be doing it. That's not just for the Peter Thiels of the world.

(By "should" I don't mean "I would prefer if policy were this"; I mean "this is what's smart to do right now, at an individual level, under current policy".)