ECONOMIC CRISIS MEANS GREAT TIME TO BUY A ROTH IRA

DOLLARS AND SENSE

by Joe Plemon  

            Assuming  you are investing for future retirement, you should seriously consider the Roth IRA (Individual Retirement Account).  I am already a huge fan of the Roth, but as the national debt increases with each federal bailout, the Roth is looking better all of the time.

            Let me explain.  With the traditional IRA, you get to deduct the contribution for the tax year it was made, but you will pay taxes when you start drawing the money out for retirement.  The Roth, on the other hand, is purchased after you have paid your taxes and is therefore tax free when withdrawn.  When deciding which one is best for you, conventional wisdom is that if you believe you will be in a lower tax bracket when you retire, you are better off with the traditional IRA.  Why?  Because you were able to claim a tax deduction at a higher percentage, but pay those taxes later at a lower percentage. 

           But I ask you: do you seriously believe that  the tax structure when you retire will be essentially the same as it is today?  Is it possible that even if your retirement income is less than your working income,  your tax rate could be higher than it is today? 

           I just don’t see how we can ever pay down our $10 trillion national debt without hiking taxes.  My longhand math (calculators don’t have that many zeroes) indicates that we owe $30,000 for every man, woman and child in America.  To compound the problem,  the Social Security Trust Fund is scheduled for depletion in about 30 years unless “something” is done.  That ”something” will have to be higher taxes or less benefits.

              Our future tax structure is very uncertain because of our national crash course with debt.  Pay your taxes today with a Roth instead of gambling your retirement on the uncertainty of future tax rates.