Roth and the "Tax Free" concept

You may be right, but if you look at Greece, France, and England (probably a few more like Spain and Portugal) the reverse direction is ... austerity in the form of budget cuts.

I'm not an authority on this, but I did read that the overall optimal level of taxation / stagnation is around 17% taxes / GDP. Congress knows this, and they know that the current deficits are unsustainable. We have had surplusses in this country before. Why not again? Why not always? Why not make that normal, like it SHOULD be? It is stimulative to the economy when everything is going well - confidence goes up. Cutting government reduces inflation - which we may see in coming years.

One arson fire doesn't mean the whole town is doomed. The cops get on it. In this case, we ARE the cops, and we have an election coming up.

Chances are they may do so in a stealth way. For example, similar to how they handle MAGI - take your AGI and add stuff back, then use the MAGI to figure out if you qualify for various things, or if you start running into phaseouts of other things, etc.

But it seems unlikely that they would simply tax it at your regular marginal income tax rate.

There are other similar ugly things they could do and still get away with claiming that they are sticking to the promise to not tax Roth distributions. You suggested another below - the "special Medicare tax" that ObamaCare is introducing for the first time on investment income could certainly be extended to include Roth distributions.

There's no reason to think that if they attack Roth distributions that way, the same attack would hit regular IRA distributions, especially if it's done in the manner of that Medicare tax. So are you better or worse with the Roth? In that case, still better.

I don't see them taxing the entire growth at regular marginal income tax rates. I think the blowback would be too hard. Congress will need some sort of cover to claim that they are not taxing it as regular income. It'd have to be through stealth (ie. add back into MAGI, thus forcing things like greater amounts of folks SS income to be taxable, etc) or a surtax on all IRA distributions.

Arghh, I wasn't aware of that tax, which is apparently slated for

Furthermore, we have potential tax rate increases after 2010, so for that and possibly a roth deferral and medicare slamming the 2011++ period, maybe 2010 is the time to "wash" any capital gains during this year. I notice many brokers are offering commission free etfs (a handful in fidelity, a hundred in ameritrade, maybe some in schwab?) so it may be worthwhile converting any above-water investments into them (enough choice to avoid literal "wash" sales).

Here's a crazy idea to try to profit from rather than just suffer dysfunctional gov't whimsy. They are pushing expensive and farmland- killing biofuels instead of abundant and clean natural gas (maybe because more farmers vote or lobby than gasfield owners - gives hope for voting roth holders). So short gas (UNG) or go long biofuels (FUE). Or even more, consider how PC biofuels are squeezing farmland now needed for basic necessities of life in upwardly mobile emerging nations, such as sugar (SGG) and cotton (BAL).

I agree with your warning, but for other reasons.

The statement "I think my taxes will be higher at retirement" doesn't match with the statistics of how little most people save. In today's dollars, to retire in the 25% bracket would take nearly $2M in assets.

Second (false) assumption is that one will be in their current or higher rate right till retiring. No chance of a low income year? Lost job? Spouse stays home? Etc.

Last - the move to a wholesale conversion which throws one into a higher bracket defeats the whole intent. Those talking about converting these huge numbers should take a step back, do the math, and just convert to top off their current bracket.

Joe

Gene-

I believe it's best to plan using the tools available now. Qualified withdraws from a Roth are tax free (right now). If the rules change, it is very possible the rules would be in effect "starting Jan 1 201x" so anyone wanting a tax free withdraw should take their money out "Dec

If the mutual fund industry sees this coming, you better believe they will lobby against it (the mass withdraws from Roths would probably cause some issues with the market).

Do the mutual fund companies provide information which states if they have $5 billion in assets, how much of those $5 billion assets are in

Yes, no link handy, but I've seen many articles that show total 401(k), IRA, Roth US account totals. Joe