Not true. Anyone can buy stocks and bonds, and for most part defer paying taxes on unrealized gains for decades. And when they do need to realize gains (i.e. sell), the tax rate will be the lower LTCG rate. And anything left over at death passes to heirs free of income tax (basis adjustment to FMV).
>a no-brainer way to put away an aggregate of $76,000 in tax-advantaged
You keep on using the term "tax advantaged" without defining what that means.
For Trad. IRA/401k compared to Roth, it is a simple matter of your future tax rate compared to today. If those two rates are the same, there is no difference[0]; if future tax rate is higher, go Roth, if future tax rate is lower, go Trad IRA/401k
> pointless and easily bypassed MAGI limits for IRA
Please explain "easily bypassed". If you meant the "backdoor" aspect, that is only easily by-passed if one does not have any pre-tax money in Trad. IRA. And if you mean Roth 401k, those are even much less common than the ordinary 401k.
>In a just world we would eliminate ....
Just as we would allow health insurance to be paid with pre-tax money, whether employed or not.
[0] for simplicity-- using round numbers and assume 5% simple annual investment return (no compounding), and 20% tax rate
Pre-tax contribution: $10K + (20yrs x 0.05 x $10K) = $20K
withdrawal at 20% tax = $16K net
Post-tax (Roth) contribution: ($10K - $2K tax) + (20yrs x 0.05 x $8K) = $16K
> Not true. Anyone can buy stocks and bonds, and for most part defer paying taxes on unrealized gains for decades. And when they do need to realize gains (i.e. sell), the tax rate will be the lower LTCG rate. And anything left over at death passes to heirs free of income tax (basis adjustment to FMV).
I could have been more precise, but I figured it was pretty obvious through context: tax-advantaged retirement savings. That some people have the opportunity to save upwards of $75,000/yr in tax-sheltered accounts and others can only put away $7,000/yr is a complete travesty.
> You keep on using the term "tax advantaged" without defining what that means.
…because that term already has a commonly-accepted definition. And whether or not a Trad vs. Roth account is better for one's specific situation, either and both are better options that are available to a whopping $69,000 more of my savings than for most Americans.
> Please explain "easily bypassed". If you meant the "backdoor" aspect, that is only easily by-passed if one does not have any pre-tax money in Trad. IRA. And if you mean Roth 401k, those are even much less common than the ordinary 401k.
Jesus christ, what is the point of this nitpicking? None of it has anything to do with my actual point.
And yes, I mean the backdoor Roth. And if you already have money in a Trad IRA, you can roll that into an employer's 401(k) to no longer have to deal with the pro-rata rule.
Most motivated high-earners can get around the MAGI limits with nearly zero effort, which is my point. Just eliminate the damn rule altogether, combine everything into one global limit, and remove all the stupid hoops and tax-filing complications that result.
Buying growth stocks in a regular brokerage account is also "tax sheltered" in several ways, as I explained. What do you think high earners did for a hundred years before the the recent introduction of back door techniques?
Your "actual point" has little basis in the facts.
I have no idea what "facts" you think are a hard counter this belief. That buy-and-hold has some positive tax implications in no way repudiates the reality that it underperforms doing the exact same with either a) pretax funds, or b) capturing 100% of the gains tax-free.
Some Americans have the option to put over $75,000 a year into these types of accounts which are strictly better along virtually every axis. Most Americans are limited to $7,000. Many Americans who could put $7,000 in via a backdoor don't due to the various hurdles involved. This is patently indefensible. Every American should have access to the same level of tax sheltering regardless of employer.
You said "most Americans’ only retirement savings option is $7,000 into some form of IRA"
The fact is, that statement is not true. Some 85% of taxpayers work for employers or are self-employed, and many millions of those have access to 401k plans.
"Every American should have access to the same level of tax sheltering regardless of employer."
Since you are talking about $75K annual amounts, I read that as only high-earning Americans should have access, because you don't acknowledge that most Americans cannot afford to put $75K or more into retiremement every year, they need the money to put food on the table and roof over heads.
You are arguing for making a tax break for the rich more widely available but pretending like it is for the benefit of everyone.
Not true. Anyone can buy stocks and bonds, and for most part defer paying taxes on unrealized gains for decades. And when they do need to realize gains (i.e. sell), the tax rate will be the lower LTCG rate. And anything left over at death passes to heirs free of income tax (basis adjustment to FMV).
>a no-brainer way to put away an aggregate of $76,000 in tax-advantaged
You keep on using the term "tax advantaged" without defining what that means.
For Trad. IRA/401k compared to Roth, it is a simple matter of your future tax rate compared to today. If those two rates are the same, there is no difference[0]; if future tax rate is higher, go Roth, if future tax rate is lower, go Trad IRA/401k
> pointless and easily bypassed MAGI limits for IRA
Please explain "easily bypassed". If you meant the "backdoor" aspect, that is only easily by-passed if one does not have any pre-tax money in Trad. IRA. And if you mean Roth 401k, those are even much less common than the ordinary 401k.
>In a just world we would eliminate ....
Just as we would allow health insurance to be paid with pre-tax money, whether employed or not.
[0] for simplicity-- using round numbers and assume 5% simple annual investment return (no compounding), and 20% tax rate
Pre-tax contribution: $10K + (20yrs x 0.05 x $10K) = $20K
withdrawal at 20% tax = $16K net
Post-tax (Roth) contribution: ($10K - $2K tax) + (20yrs x 0.05 x $8K) = $16K
withdrawal at 0% tax = $16K net