With all the “noise” coming from Washington, confusion as to the future is the “new normal”. At least when it comes to taxes. While there is no way to predict what will pass the chopping block, a few items have more support than others. One item of interest is the current law regarding employer 401k after tax to Roth conversions. Right now, the law allows for conversion of after-tax dollars to a Roth IRA in a rollover conversion from a defined contribution plan (401k, 403B, ESOP, or Profit-Sharing Plan) to a Roth IRA. Doing this, especially at a young age, has certain advantages and some of you may already employ this strategy on an annual basis if your plan allows it.
Reading the tea leaves, and based on the political winds, this may not be the case at the end of 2021. Therefore, if you have After-tax dollars in your workplace defined contribution plan (401k, 403B, ESOP, or Profit-Sharing Plan) you may want to consider doing some review and planning on those assets before year end.
Again, while this is not a done deal (and will continue to change as the bill gets revised in congress) It is noteworthy and worth a few minutes to review. As the Government continues to look for ways to fund its spending, other planning tools may be looked at. We will continue to pass over our thoughts.
If you or anyone you know are affected by this potential change or are unaware of this strategy, please don’t hesitate to reach out and we can discuss.
Disclaimer- Retirement Capital Advisors does not provide tax or legal advice