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I'm skeptical of the Roth IRA. I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as

I'm skeptical of the Roth IRA. I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as working people. This is an argument against the Roth (compared to a traditional IRA). Tax rates are likely to go up in the next few decades, which is an argument for the Roth. On the other hand, if the tax burden shifts from income taxes to a VAT or a national sales tax, then the Roth might come out equal or a loser compared to a traditional IRA. I think a VAT is likely. There's also the possibility of retirement accounts being regulated in terms of what investments are allowed. For example, requiring a certain percentage of your account to be in U.S. government bonds. These ideas have been floated around Washington a little bit. This is a minus for both the Roth and the traditional IRA. I still invest in my SEP-IRA (which is hella good if you want to really sock it away) and a little bit in my Roth (hedging), but I don't max either of them out any more.

byoung2 16y ago
I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as working people. You're right about that...most people will work for 40 years and then retire, cutting off their main source of income and dropping to a lower tax bracket. My parents, on the other hand, have made more money since retiring 5 years ago than they made in the 30 years prior (mainly through real estate investments). I think entrepreneurial types will likely fall into this category, where they continue to make more year after year, even into retirement, and so the Roth IRA makes sense at least for now. I'm predicting a VAT within the next 15 years, but hopefully there will be some grandfather (pun intended) clause that phases it gradually for IRAs opened now.

byoung2 16y ago

I think many people will get along on a lowered income in retirement and will be paying taxes in a lower bracket than they do as working people. You're right about that...most people will work for 40 years and then retire, cutting off their main source of income and dropping to a lower tax bracket. My parents, on the other hand, have made more money since retiring 5 years ago than they made in the 30 years prior (mainly through real estate investments). I think entrepreneurial types will likely fall into this category, where they continue to make more year after year, even into retirement, and so the Roth IRA makes sense at least for now. I'm predicting a VAT within the next 15 years, but hopefully there will be some grandfather (pun intended) clause that phases it gradually for IRAs opened now.