Earlier quoted context omitted.
If any restriction is intolerable then what remains?
Liberty.
Not sure, I follow. That doesn't make any sense.
Self directed IRAs under attack in proposed tax bill
281–290 of 306 posts
Re: Self directed IRAs under attack in proposed tax bill
#282The whole article is predicated on the lie that low and middle income earners are buying private placements and LLCs in their IRAs. They are not. Full stop.
What is "Full stop"? I'm seeing it used more and more in political internet discussions
I don't mean it to indicate closemindedness. I do mean it to indicate that there aren't a whole bunch of exceptions and clauses to come. Take it as a contrast to an article that spent a lot of time and words on an argument that was based on what I believe to be a very flawed assumption. IMO so flawed as to be intentionally deceitful.
Re: Self directed IRAs under attack in proposed tax bill
#283Earlier quoted context omitted.
Not in the US. IRA contributions are post tax. 401k contributions are pre-tax. Depending on where you live this may be semantics as they may be the same program with different names.
This is wrong. Both 401k and Ira have roth variants which are post tax. The normal variants are pre-tax.
Non-Roth 401ks can have before-tax and after-tax contributions, though I'm not certain I see the point of making after-tax contributions since the gains will be taxed at ordinary income rates (not as capital gains) when distributed and you won't be able to make withdrawals without penalty until you reach "retirement age". You might as well just open a brokerage account and invest on your own. The one selling point for after-tax 401k contributions was that you could roll them over into a Roth IRA later, but that won't be an option any more if this proposal passes. Which is too bad for anyone who was counting on a Roth IRA conversion as part of their retirement strategy.
Re: Self directed IRAs under attack in proposed tax bill
#284Re: Self directed IRAs under attack in proposed tax bill
#285Earlier quoted context omitted.
That’s also incorrect. If he could have done this in a 401k he would have Exactly the Same amount of money.
He would owe taxes on the amount when he withdrew it from the 401k or traditional IRA. He will not owe taxes on it the gain occured while the stocks are in a Roth IRA.
Yes. Again, he will have the exact same amount of money in both cases at the end of the day. Somehow you envision that finding opportunities to return 10.000x on investment are a tax loophole. If have such “loopholes” available simply let me know and I will fund them on a pre- or post-tax basis. Perhaps society should allow more people the freedom to find these lottery tickets on their own and grow instead of demanding the funds and investing them in things like abandoned military equipment in foreign countries.
Re: Self directed IRAs under attack in proposed tax bill
#286Earlier quoted context omitted.
You’re missing the point. In all accounts you are either taxed now or later. The exact same amount of $ value in incremental capital gains are untaxed in all qualified accounts, by design and intent.
One of us is clearly not correctly informed about this. Traditional IRA: contributions are pre-tax, tax paid upon withdrawal. Theory is you will contribute more to avoid taxes while earning, compound growth works to your benefit, but now pay taxes on the full amount in the IRA as you withdraw it. Roth IRA: contributions are post-tax, no tax paid on withdrawal. Conventional theory for typical earnings level is that yo…
I agree with this. If you do the math, you will recognize that the end amount that you have in your pocket, given the same tax rate, is the same. That is true irrespective of the rate of return.
Re: Self directed IRAs under attack in proposed tax bill
#287Earlier quoted context omitted.
One of us is clearly not correctly informed about this. Traditional IRA: contributions are pre-tax, tax paid upon withdrawal. Theory is you will contribute more to avoid taxes while earning, compound growth works to your benefit, but now pay taxes on the full amount in the IRA as you withdraw it. Roth IRA: contributions are post-tax, no tax paid on withdrawal. Conventional theory for typical earnings level is that yo…
I agree with this. If you do the math, you will recognize that the end amount that you have in your pocket, given the same tax rate, is the same. That is true irrespective of the rate of return.
That's missing the point entirely.
If Thiel had been unable to place that stock into a Roth IRA (i.e. buy it with funds already in the Roth), then the gains on it would end up being subject to taxation. Instead, he will be able to withdraw the $5B or whatever it is without paying any taxes on those gains.
For example, had he done this with a traditional IRA, then as he eventually withdrew the money, he would pay tax on the full amount in the IRA.
Put pseudo-graphically:
Roth: 1: invest $1 of post-tax income in the IRA 2: direct the IRA to purchase $1 of some stock 3: wait N years 4: IRA now worth $5B 5: withdraw $5B tax-free
Traditional/401k: 1: invest $1 of pre-tax income in the IRA/401k 2: direct the IRA/401k to purchase $1 of some stock 3: wait N years 4: IRA/401k now worth $5B 5: withdraw $5B and pay income tax rate on $5B - $1
Difference in total benefit: whatever the tax is on $5B - $1
Re: Self directed IRAs under attack in proposed tax bill
#288Earlier quoted context omitted.
Not sure, I follow. That doesn't make any sense.
It's pretty obvious. When you don't tolerate any restrictions, liberty is what remains.
This is a common refrain but just false, restrictions and regulations are very often the only thing guaranteeing liberty. We’re often told “free market good, government bad” but the reality is somewhere in the middle (without even getting into the fact that the free market is itself created through government regulation)
I’d recommend checking out Mike Konzcal’s recent book Freedom From The Market https://thenewpress.com/books/freedom-from-market
Re: Self directed IRAs under attack in proposed tax bill
#289> Under these provisions, you would no longer be allowed to invest your IRA into private placements and single-member LLCs, regardless of your level of income or wealth. > This will result in significant tax consequences for many people, including low and middle-income investors. BS! In order to legally invest in private placements, you must be a "accredited investor" which means you earn over $200k individually or $…
That's certainly middle class lifestyle in many states in the US if you have a family with kids and have never had a windfall from parents, inheritance, startup luck, etc. Trying to figure out retirement on top of that is a challenge.
Earning > $300k when married filling jointly is very much not a middle class income & lifestyle. I certainly won’t disagree that figuring out money and retirement at that income level is hard, but 95% of America has it harder.
So I’ll say that then saying this impacts the middle class is disingenuous at best. On top of that, private placements usually require bare minimum investments of $50k and realistically $100k min investment is not uncommon. If you have that sort of cash to put into higher risk deals, middle class you are not.
Re: Self directed IRAs under attack in proposed tax bill
#290Earlier quoted context omitted.
Making a lucky investment is “abusing the intent”?
$5B is more than the GDP of several dozen countries. I dont think that was the intent of the law.
Sure, but there was nothing in the law that said “this tax advantaged account is only for return of less than 10,000%”