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Author: drbear One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75888  
Subject: Re: Roth Conversion? Date: 1/13/1998 2:59 PM
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<<I don't give Congress credit for having enough guts to try to tax the Roths later on. They backed off taxation of Medicare years ago because of the outcry, and they would do the same here.>>

Whether or not the Roth is a gift or a gimmick, at least it increases the appeal and flexibility of retirement accounts. Will it stay in the current tax free format? That's debatable. What's not debatable is that we're all being asked to assume greater responsibility for financing our own retirement.

The traditional 3-legged stool of retirement funding relied on employer benevolance (defined benefit plans), government benevolance (Social Security), and our own savings. We could count on a steady (albeit modest) income in retirement. Now we're increasingly being asked to make our own decisions. Defined contribution plans are replacing (rather than supplementing) defined benefit plans. Vehicles like the IRA (regular and Roth) encourage us to increase our own savings.

Now what about Social Security? I have no idea what will happen when Congress finally gets around to reform, but with the ratio of payors to payees steadily dropping, something is going to give. (Can hardly wait for that debate to begin.) Will the payroll tax be increased, benefits taxed more aggressively, age requirement increased, eligibility be subject to need? It could be any or all, but the bottom line is that future retirees will ultimately see a lesser percentage of their retirement income coming from the government.
That takes us directly back to funding our own retirement. Political expediency and the (almost) balanced budget may have given birth to the Roth, but I believe in the long run, Congress will try to enhance retirement vehicles in order to ease the gradual withdrawal of Social Security benefits. I hope that means the Roth (or whatever else they come up with) will continue to look like a good deal in 30 years.
Unfortunately, my crystal ball is cloudy, but I also have a hard time believing my marginal tax rate will ever go down. Based on that, I'll be putting new money in and converting at least some of my IRA funds. I have my doubts about pre-paying the government, but I think the long-term trend will encourage this type of account.
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