Roth 401k Conversions Pt II

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Yesterday I talked about how Roth conversion features are considered a revenue raiser by Congress.

Today the Joint Committee on Taxation, the congressional body that provides tax advice, issued a report on the tax effects of the new legislation. 

In the column entitled “Revenue Provisions”, which is another way of saying money raisers, the Committee estimated how much revenue was going to be raised by allowing 401k plan participants to convert their 401k balances over to Roth accounts. 

The estimates were that over the ten year period from 2011 to 2020, the government would raise over 5 billion dollars. 

What is really interesting about this is the Committee didn’t give any estimate of how much money the government was going to lose in allowing people to build up money in a completely tax free environment. 

Lets say you converted $100,000 from the traditional side of your self directed 401k account to the Roth side.  You then had your self directed account invest in hard money loans secured by real estate for the next 10 years, with an average interest rate of 10%. 

Your initial $100,000 would grow to over $250,000.  All. . . tax . . . free.

Future taxes are currently on sale, better act fast.