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Comment by randomacct3847 | Hacker News Reader

Get rid of the Roth IRA income cap and raise the max annual contribution limit 4x. Not that hard.

Get rid of the 401k entirely and let everyone use IRA/Roth IRA with the increased contribution limits. Make contribution limit a percentage of income rather than a fixed amount (e.g. Canadian RRSP allows 18% of last year's income). Allow a minimum dollar amount contribution even if it exceeds that percentage. E.g. $50k-earning worker wants to save $10k/year by living with parents, not eating out etc even though contributions are limited to 15% of income.

Calculate SS tax after these deductions, not before.

EDIT: Please let me know why these might be bad ideas. I think it's unfair that currently only people with employer-sponsored 401k plans can save $18k and everyone else has only an IRA with $5.5k limit. Or some people can do a self-employed 401k which is a thing I don't know a lot about. It's crazy there are so many options for what should be a simple thing "I want to put aside some money now, some of it tax free, for when I retire."

I'm disqualified from contributing to a Roth IRA. My uninformed speculation on why Roth IRA income caps and max annual contribution limits exist is that it's the sake of tax revenue.

In practical terms, you’re not. Contribute to a traditional IRA. Roll it over immediately into a Roth IRA. You can do this regardless of how large your income is.

Note: unless you have existing savings in a traditional IRA.

Yeah, this is an important caveat. If you have existing IRA funds, roll them into a 401(k) first.

Wait before rolling it over, probably at least 30 days. If you do it immediately it is considered a single transaction and illegal. If audited they’ll make you reclassify it and pay penalties.

Any reference or citation for that? I have never heard that advice and a quick googling doesn't turn anything up either. I've generally heard the opposite advice (convert the next day to minimize exposure to [undesired] gains/losses while a traditional IRA).

The google term you want is “structured transaction.” Any sequence of legal transactions clearly designed to do an illegal thing when done directly is to be treated the same as if it had been done as a single step.

The point of waiting e.g. 30 days is EXACTLY that it exposes you to gains/losses and you can rightly say the two actions are no longer connected.

Interesting, I've always been informed that waiting one day is sufficient. But, didn't the backdoor roth get closed in the recent tax change?

It didn’t, and doing an immediate rollover is not considered structuring since rolling over IRA contributions into a Roth is explicitly legal.

You are confused as to the definition of a “structured transaction”. There is no issue with performing an immediate rollover. Rolling over IRA contributions into a Roth is not only legal, it is explicitly endorsed by the IRS.

You can do a "backdoor Roth" to get around the income cap https://www.bogleheads.org/wiki/Backdoor_Roth

I know it’s possible, but get rid of all the hoop jumping. The more important thing is just raising annual contribution limits. 6000 is ridiculous.

"Tax breaks for the rich"?

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