What do you think about Roth IRAs?

[FreeJoe]

I'm not asking whether you think you should get one. I'm asking about whether congress should allow them.

I'm all for providing incentives for long term savings. I have nothing against regular IRAs. If you think about it, with a regular IRA, congress is saying that they will forgo tax revenue from you for the promise that you'll pay those taxes at a future date. With a Roth IRA, congress is reversing that and getting the tax money from you now for the promise that you won't owe taxes in the future. That's sort of like taking money from future generations and spending it now.

Does that seem right?

In the interest of full disclosure, I converted money from my IRA to a Roth at the end of last year and feel kind of funny about it and am trying to decide whether to undo it.

[ellenfl]

1. i have been contemplating a roth but don't see the advantage. eom

[truebrit71]

10. No taxes when you withdraw it when you retire..

...sounds like a great idea to me, and that's why they cap the number of folks that can put money into a ROTH based on their income...

The tax deduction now on a traditional IRA versus not paying any taxes on withdrawals later seems to be a no-brainer for most...

But you should consult with a professional first...

[CountAllVotes]

2. Wow, that sucks!

That would be the reason for caring to convert to a ROTH IRA.

I have a traditional IRA and am not eligible to convert it (not that I would after reading your post).

I don't know how much of an effort it would be to convert it back but be careful is my advice and you may wish to consult with the IRS before you proceed.

Best of luck!

[MADem]

3. Well, typically, the people dipping into their Roth IRA are going to be in a lower bracket when they

are accessing it.

I look at is as "You can pay me now, or you can pay me later." Either way, the government is going to get some taxes. The only question is when. People feeding into a Roth are likely in a higher bracket than retirees taking money out of their regular IRA.

[SlimJimmy]

4. Not necessarily. A traditional IRA is tax exempt until you use the money at

retirement. The theory is that you'll be at a lower tax rate then, so will actually pay *less* in taxes. With the Roth, you pay full tax rates for the younger age. So, theoretically, you pay much more now than later. So who is *really* getting cheated out of money?

That's sort of like taking money from future generations and spending it now.

[yellowcanine]

6. Yes. I suspect for many taxpayers Roth IRAs are actually a bad deal. Also not just a lower rate

but a larger personal exemption after 65 so even more likely that less taxes or maybe even no taxes will be paid on that conventional IRA payout.

[jeff47]

11. Only if your Roth stores the money under your mattress

Your Roth IRA is going to be invested in something. You won't pay taxes on the returns on those investments.

Whether or not it's better than a traditional IRA depends on your current tax bracket, your expected tax bracket, and your expected rate of return on your investments.

[yellowcanine]

5. A lot of people won't pay taxes on regular IRAs anyway.....or at least not as much tax -

Because their incomes will be much reduced and there is a larger personal exemption after you are 65. In the grand scheme of things it likely is a wash in terms of the larger economy and all taxpayers. So it is probably best to sit down with an investment adviser and decide what is best for you and not worry so much about the impact on the whole economy.

[dmallind]

7. Depends on future tax rates, but don't see a problem

Regular 401ks for low income retirees may not be taxed at all if their income is under the net taxable level, so if you seek to maximize taxes that may be more unfair than Roths, which are at least taxed now.

Remember too that they are limited in both income level (above 160k or so not eligible or thereabouts) and investment (5-6k a year each) so this is not a way for the bluebloods to hode many millions. It's decidedly middle class and modest to encourage savings, which is no bad thing.

[bemildred]

8. Financial onanism. nt

[Turbineguy]

9. The problem comes when the government changes the law

and they always do sooner or later. That's why it's important that you vote republican. That way Wall Street can steal your retirement. You know they want to, it's just that the pesky law doesn't allow it yet.

[jeff47]

12. Why was that future generations money?

The only reason you think the money belongs to future generations is the traditional IRA puts it there. It's not their money. In both cases, it's still your money.

What makes me uncomfortable about Roth IRAs is you don't pay taxes on the investment income within the IRA. With a traditional IRA, you'll pay taxes on investment income when you withdraw that income.

[BadgerKid]

13. Another thing is that Roths don't have forced distributions.

If a person had sufficient income from other sources, then the forced distributions of traditional IRAs past the age 70.5 might hypothetically push you into the next tax bracket. Depends on the amounts involved, of course.