Myth vs. Fact

Myth #1: Joe Biden’s proposal is not a tax hike on the Middle Class.

  • Fact: False. Biden’s proposal eliminates Roth 401K Conversions for IRAs and employer-sponsored plans for single filers making $400,000 or more, and joint filers making $450,000 or more. This will hit millions of people – not just the rich as Democrats claim – especially hard given how it stifles their IRA options and will double-tax the income they set aside for retirement.

Myth #2: Biden’s proposal preserves Roth after-tax contributions.

  • Fact: False. Biden’s proposal will ban after-tax contributions from being converted to Roth regardless of income level. This is a ‘bait and switch’ by Biden. President Obama signed into law the Small Business Jobs Act of 2010, which allowed in-plan conversions. This raised significant monies for the U.S. Treasury. Now, Biden needs a new piggy bank to pay for his special interest programs and is raiding your Roth IRA to pay for it.

Myth #3: Democrats claims IRAs are a “tax shelter for the ultra-wealthy.

  • Fact: Tens of millions of Americans use IRAs to save for retirement. Less than 500 Americans have aggregate IRAs worth more than $25 million. Joe Biden’s proposal is “clearly intended to punish IRA holders,” especially those that grew their accounts successfully to have large values. Joe Biden’s plan changes the rules midway through the game and will smack middle-income IRAs held by families, entrepreneurs and millennials with more audits, higher penalties, forced divestiture, a double-tax and an increasingly insecure retirement. This is fundamentally unfair, and undermines our retirement pension system.

Myth #4: Under Biden’s proposal, IRAs will help create jobs and build new businesses and support women-owned businesses.

  • Fact: The 10 percent threshold rule will harm average farmers, landowners and small business owners. Biden’s proposal restricts self-directed IRA investments in entities such as small businesses or a real estate investment where the owner holds a 10 percent or greater interest, either directly or indirectly, in an entity where the security not readily tradable on a securities market. This will force divestiture from the investment. By forcing the IRA holder to determine the debts and liabilities of their assets, the result could be positive or negative net worth. This could lead you to pay significant taxes when in fact an investment’s liquidity is only on paper. This will do more harm than good for small businesses and investments across America.

Myth #5: Biden’s proposal is fair, and will help all Americans grow their IRA.

  • Fact: Biden wants the government to pick winners and losers with retirement savings. If you own an IRA that is private like most Americans, the values of those “IRAs are not fixed or guaranteed.” Biden’s proposal “limits the amount of IRAs held by an individual to $5 million… by forcing distributions and limiting contributions.” Moreover, his proposal includes drastic reporting requirements which sets up having to report accounts of $2.5 million+. This sets the stage for future proposals requiring even lower distributions in the future. This is only the beginning. Biden’s proposal would lead to “considerable damage” said Mark Warshawsky, a retirement policy expert with American Enterprise Institute. Jody King, director of financial planning at Fiduciary Trust, recently said the proposal has the ability to “significantly impact” long-term wealth building because of the Roth IRA’s benefits of tax-free growth.