Changes are Coming to Roth IRA in 2022

As the Biden administration searches for cash to fund their social programs, they are taking aim at your Roth IRA. If you have a larger Roth IRA, expect the government to begin taking a cut of your earnings or eliminate your ability to contribute to a Roth IRA in 2022. 

Under the new rules, persons with annual incomes of over $400,000 (and couples earning more than $450,000) would be prohibited from contributing to a Roth IRA in 2022. These same high earners would also be prohibited from converting their traditional IRA or other retirement accounts into a Roth IRA. 

In addition, if you have more than $10 million in your Roth IRA in 2022, no matter your income, you would be prohibited from contributing any more to that account. If you gambled on high-risk investments in your Roth IRA and it paid off, the government has determined that $10 million is enough for you.

Editor’s Note: As of the writing of this article, it appears the limit will be $10 million. There are some pushing for this amount to be lowered to $5 million.

And, finally, if your Roth IRA reaches $20 million in 2022 or thereafter, you will be forced to take a distribution to get below $10 million or $20 million. The final numbers are not in, but suffice it to say, if you really won big in your Roth IRA in 2022, you will be forced to distribute out the profits, losing the tax benefits of the retirement account.

If you’re a mere mortal or average earner like me, you might be wondering how the heck anyone can get $20 million into a Roth IRA. The contribution limit for 2022 is $6,000 for both traditional and Roth IRAs. 

It’s actually quite simple to understand (not to achieve, of course). Let’s take the case of Mitt Romney as an example. His IRA has received a lot of press and is a public record because of his political status.

It’s estimated that Mitt’sIRA reached as high as $101 million back in the day when he was running for President. How is this possible considering the contribution limits? 

Mr. Romney ran a successful investment firm called Bain Capital. This firm would invest in pre-IPOs and startups. Mitt would receive stock valued at a few dollars in exchange for his services, which he contributed to his IRA. 

When some of those companies went public and became billion-dollar successes, the value of his IRA account grew with the stock price. And, if he did cash in the stock, the money would remain in his IRA account tax-free (Roth) or tax-deferred (traditional IRA).

The difference between a traditional IRA and a Roth IRA is also simple. Money going into a traditional IRA is not taxed when earned. You pay tax on the income, profits, and interest earned when you take a distribution from a traditional account. 

A Roth IRA is the exact opposite of a traditional IRA. After-tax money goes into a Roth and you pay zero tax on the gains when you take it out (assuming you take out the cash at age 59 ½ years of age or take some other permitted distribution).

So, if the stock goes into a Roth IRA at $6,000 and comes out tax-free at $6 million, you have an absolutely massive tax-free transaction. You paid tax on the $6,000, but not on the gain of $5,994,000.

How big can these accounts get you ask? A recent ProPublica report claims that Peter Thiel, a PayPal co-founder, owns a Roth IRA that grew to $5 billion in 2019, up from less than $2,000 in 1999.

When these rules come into effect, Mr. Thiel will be forced to distribute most of his Roth IRA in 2022, losing all of the tax benefits. Otherwise, he needs to wait until 2027 when he’s 59 and a half to make these withdrawals tax-free. 

And these massive Roth IRAs are not as rare as you might think. Democrats on the House Ways and Means Committee released a list showing that, since 2011, the number of Americans with IRA balances of over $5 million nearly tripled to 28,000 for a total of $279 billion out of the reach of the IRS. 

In the big leagues, nearly 500 taxpayers had traditional IRAs worth $25 million or more, with the average balance in those accounts of $150 million. The average Roth IRA balance among the 156 largest accounts was $100 million.

I believe this is the first shot of the Bidan administration at traditional IRAs and Roth IRAs. As the government needs more money for its social programs, expect an all-out war on larger savers with money in retirement accounts. Money in a US IRA can be easily seized or taxed.

What’s next? How about limiting the investment options of all retirement accounts? Obviously, this administration needs to protect its people from making risky investments with their IRAs. We’re the government and we’re here to help! 

I expect self-directed IRAs to be eliminated soon and all retirement accounts to be forced into US treasuries. It’s been reported that these accounts were estimated to be around 19.29 trillion U.S. dollars in 2020. This cash could pay for a lot of green new deals!

So long as your traditional IRA or Roth IRA is in the United States and within the reach of the government, it’s at risk. For assistance in moving your IRA into an offshore IRA LLC, please contact me at I will be happy to help to shield your investment account.