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Author: rickisme Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75796  
Subject: Rush to Roth Date: 1/4/1998 5:11 PM
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I have been thinking about the Roth IRA which makes good sense. Heck, wouldn't it be great in retirement to receive retirement checks from Roth IRA and never have to pay taxes? I wonder though whether there might be some risk associated with the Roth IRA irrespective of general market risk or future tax brackets. For example, what if in the future the Congress becomes more conservative and we have a conservative President and they decide to scrap the tax code and implement a consumption tax? Or what if a flat tax is imposed? How will these changes affect your calculations of future wealth? I have always been a believer in taking the money now as opposed to waiting for it. The tax breaks that I can take now with a regular IRA still seem more attractive to me than the Roth IRA because I can not only get a deduction (reduction of income subject to taxation), but also the money I save in taxes can be reinvested in other sheltered account such as municipals or maybe I can increase my 401k contribution, etc. (I know on paper one can prove it is better to invest in Roth, the future value is more, etc.) The government is planning that many will transfer their regular IRA's to the Roth IRA's which will definitely provide Uncle Sam with new revenue over the next four years via the tax that must be paid on the transfer. But what if Congress decides that it wants to change the law in the future and decides to tax some of the distributions in the future? What if they say we can't afford to do this anymore and only regular IRA's will be allowed from some point in time forward, but allowing any money put in Roth to still be tax free? Will it be worth it to have foregone the deductions one could have taken while putting money in a Roth? Maybe it doesn't matter one way or the other but I think it is certainly worth thinking about.


rickisme
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