An Introduction

Hi. Welcome to BourGroup and my blog. Phil

Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.

I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.

"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.

Wednesday, February 11, 2015

Proposed Tax Changes

I have not written in almost a year (February 2014 was my last post). There is always much to write about though and proposed tax changes are high on the list.

I recall reading Larry Burkett's book back in 1991 titled "The Coming Economic Earthquake" and remembering that he said that tax-deferred accounts only hold promises and not guarantees.

In President Obama's State of the Union address, he touched upon a few tax proposals but in his proposed budget there are even more changes than what he highlighted in his speech.

They are just that, though, "proposed" and unlikely to ever make it into law.

But as Michael Kitces recently writes in his blog "...nonetheless, the proposals provide important insight into what the White House considers..."

Just a few examples of proposals over the last few years, and recently, may give you pause:

(1) No RMD's (Required Minimum Distributions at age 70 and 1/2) if all of your IRA balances aggregated together are under $100,000 or you annuitize a portion of your IRA's to get you under the $100,000 limit. That sounds good.

(2) Eliminating the "back-door" ROTH. This is where you contribute to a Traditional IRA non-deductible contributions up to the limit ($5,500 or $6,500 for 2015 depending on age) and then convert those funds, after a reasonable time, to a ROTH IRA. For those whose income exceeds the ROTH contribution income limits (starting the phase-out at $183,000 of Adjusted Gross Income for 2015) this has been a way to get money into a ROTH. The proposal limits conversions to "pre-tax" dollars only, thereby eliminating any "after-tax" dollars from conversions.

(3) Require minimum distributions (RMDs) from ROTH IRAs. Though still not taxed, under current law, no RMDs are required from ROTH IRAs. They can continue to grow tax-deferred and tax-free with no limits until death and then the beneficiaries are required to take RMDS from inherited ROTH IRAs.

(4) Limit of $3.4 million that you can accumulate and hold in tax-deferred accounts.

(5) Value-add tax or consumption tax (which would, in effect, make ROTH IRAs taxable when withdrawn and spent on something).

That is just a sampling but it holds true that tax-deferral and tax-free accounts are promises from today's government and not necessarily true for the future. Diversify accounts by tax location.