12.20.21

Backdoor Roth 401(k) and IRA Rules for the Wealthy Survive — for Now

by: CNBC

The “backdoor Roth” tax strategy used largely by wealthy retirement savers and slated to be killed next year has survived — for now. The loophole lets rich 401(k) and individual retirement account owners save in a Roth-style account, shielding future investment growth from tax. Democrats aimed to end the rules starting in 2022 as part of the Build Back Better Act, but Sen. Joe Manchin (D-WV) scuttled those plans, announcing that he won’t back the measure in its current form. The delay means the prohibition on the backdoor Roth strategy won’t kick in at the beginning of 2022 as planned — meaning taxpayers may not have to scramble to take advantage of the rules before they’re outlawed. If Democrats pass the legislation early next year, it’s likely (though not certain) that Congress would postpone the effective date to 2023, experts said.

Read the full article on CNBC