3 replies to this topic

[Rogerdodger]

Pension Protection Act of 2006

After so many lost their retirement savings on such fiascos as Enron, the government has made massive changes in Pension laws.
Yet I have not heard very much about until recently.
I first heard of this when I received some vague info from Merrill Lynch concerning upcoming changes in my wife's 401-K beginning Jan 1, 2007.
I don't think too many, even in the business, yet understand what repercussions this may have.

Then, yesterday I was listening to the Ray Lucia radio show.
If I heard correctly, this new law may allow people to diversify their 401-K funds AND roll them over directly into ROTH IRAs. They may do this after being vested only 3 years rather than the previous 5.
(This would be great for our family as my wife is locked up in a bunch of Dillard's stock and it has had a great run this year.)

IF true, the US government should see a HUGE TAX WINDFALL in the next year or so.
It could have the affect of moving up a decade of tax receipts of the baby boomers to next year or so.
And you can add to that any capital gains from profit taking of this year's 12% market rise.

This should have a tremendous strengthening affect on the US Dollar when so many had written it off as DOA.

If you are inclined to dismiss the repercussions of this new leglislation, just think back to the windfall of tax receipts when the Roth was first introduced and people were allowed to roll over IRAs a few years ago.

Are there any here who are informed and have considered the affects of this new law?

(I should add here than Ray Lucia usually does not encourage those in a high income tax bracket to roll over tax deferred money into a ROTH as it will likely be taxed now at a higher rate than at retirement.)

[Rogerdodger]

Let me add here that for traders, a BIG ROTH account is a beautiful thing since you don't need to consider tax consequences and the required record keeping. Especially now with the SDS and QID offerings, since you can't sell short in ROTHs.

[Data]

You've always had the ability to roll over from a 401K to an IRA, and thus to a Roth IRA after paying applicable taxes. The new program is the Roth 401K. The employer contributions are still directed to a regular 401K regardless of whether you elect to use a Roth 401K. The big tax windfall will come in Q1 from insider sellin and bonuses.

[Rogerdodger]

You've always had the ability to roll over from a 401K to an IRA,
and thus to a Roth IRA after paying applicable taxes.

Except, for those who were locked in to company stock for 5 years.
As I understand it.
At least it's all so simple.

And yes, those $650,000 bonuses.

Bloomberg
"Insiders sold $63.18 of shares for every $1 they bought in November, an analysis by Bloomberg of data from the Washington Service showed. That's the highest since at least January 1987."

Edited by Rogerdodger, 23 December 2006 - 03:00 PM.