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> That would require quite the rise in taxation rates Take a look at any of the Millenials working in any large-city downtown: they spend every single penny th

by zeveb 10y ago

> That would require quite the rise in taxation rates Take a look at any of the Millenials working in any large-city downtown: they spend every single penny they earn, they have no savings; when they get older, either the State will let them starve to death, or taxes will be raised in order to take care of them. I don't think the former is politically possible, so taxes will have to go up. Meanwhile, the same spendthrifts are by-and-large refusing to have children early, which means that there will be fewer workers to pay those taxes. That means that there will be tremendous political pressure to raid 401(k) plans and IRAs. I actually believe it's even odds whether Roths will end up taxed one way or another (perhaps with 'withdrawal fees' or some form of Social Security clawback or something): it'll be too much money for the State to leave alone.

tcoppi 10y ago
I agree that the risk of Roths being raided is quite high if we get to the point of taxes being raised that significantly to cause them to be valuable, so I don't really see a benefit personally of making significant contributions to one. I think raiding of 401ks is much less likely, as a lot more people have them and would be affected, and even if they do, you are still going to be better off than having contributed to a Roth unless they outright confiscate your balance, since you will have at least have avoided paying taxes in the past. Or we could just continue doing what we are currently, and just keep piling up the debt :) No tax increase or Roth/401k raids needed.
mgolawala 10y ago
While no one can predict the future, I tend to agree with your hypothesis. The advantage of a 401K over the Roth is that since both can be raided, at least with the 401K your money is being taxed only on the way out. With the Roth you are being taxed on the way in for sure, and you run the risk of it being taxed on the way out as well. Judging from the past my guess would be that we wont see something as obvious as a penalty or a fee. Instead what you may see is a more aggressive required minimum distribution schedule. Perhaps you could see the date of penalty free withdrawal pushed back from 59.5 to 65 or 67 years of age. Means testing of social security benefits has been mentioned before. If that gets put in place, and you fail the means test for social security, they will have effectively taxed you more your entire working life.
loeg 10y ago
You must know a different group of millennials than I do (anecdata at best).
ryandrake 10y ago
> Take a look at any of the Millenials working in any large-city downtown: they spend every single penny they earn, they have no savings; when they get older, either the State will let them starve to death, or taxes will be raised in order to take care of them. Don't forget the more politically expedient (and in my view most likely) choice: Print money to pay for it, causing inflation, which is essentially a silent tax on everyone with money.

by zeveb 10y ago

tcoppi 10y ago

I agree that the risk of Roths being raided is quite high if we get to the point of taxes being raised that significantly to cause them to be valuable, so I don't really see a benefit personally of making significant contributions to one. I think raiding of 401ks is much less likely, as a lot more people have them and would be affected, and even if they do, you are still going to be better off than having contributed to a Roth unless they outright confiscate your balance, since you will have at least have avoided paying taxes in the past. Or we could just continue doing what we are currently, and just keep piling up the debt :) No tax increase or Roth/401k raids needed.

mgolawala 10y ago

While no one can predict the future, I tend to agree with your hypothesis. The advantage of a 401K over the Roth is that since both can be raided, at least with the 401K your money is being taxed only on the way out. With the Roth you are being taxed on the way in for sure, and you run the risk of it being taxed on the way out as well. Judging from the past my guess would be that we wont see something as obvious as a penalty or a fee. Instead what you may see is a more aggressive required minimum distribution schedule. Perhaps you could see the date of penalty free withdrawal pushed back from 59.5 to 65 or 67 years of age. Means testing of social security benefits has been mentioned before. If that gets put in place, and you fail the means test for social security, they will have effectively taxed you more your entire working life.

loeg 10y ago

You must know a different group of millennials than I do (anecdata at best).

ryandrake 10y ago

> Take a look at any of the Millenials working in any large-city downtown: they spend every single penny they earn, they have no savings; when they get older, either the State will let them starve to death, or taxes will be raised in order to take care of them. Don't forget the more politically expedient (and in my view most likely) choice: Print money to pay for it, causing inflation, which is essentially a silent tax on everyone with money.