Perhaps it is because of slowing economics and the desire for people to forget their worries that Las Vegas was packed last weekend – at least it appeared busy to me as it was only my second visit. I was there for an IRA training workshop. and one thing I took away from the meeting was a confirmation of a strategy I am working on for my clients – converting as many IRA’s as possible to Roth IRA’s to eliminate the future tax risk we face as our politicians look desperately for ways to raise tax revenue.
Now I don’t know if this strategy is right for you – you would have to figure this out with your tax adviser. But my reasoning to do this follows this line of thinking:
- We will have ever-increasing bailouts – now Fannie & Freddie, tomorrow FDIC and PBGC
- Social programs put in place 70 years ago, which included no provisions for population changes or increasing life expectancies, need their funding to be constantly reworked (i.e. taxes raised)
- record deficits will finally catch up with us
- Congress will need to raise taxes to clean up their (and OUR) mess
- IRA owners make an attractive target for the tax man due to the following reasons – IRA average size is very large and much of that money is pre-tax; also, IRA owners tend to be prudent savers and since they are in the minority, they make easy targets for elected officials to pluck – they can use IRA taxes to further bail out the imprudent (government’s preferred solution)
- Tax rates are the lowest they will ever be at least for the next 30 years and tax rates will rise – I don’t believe Obama’s 250k BS – he’s going to whack everyone either directly or indirectly – I expect no less from him.
Since our country is getting pretty good now at this ‘prudent bailing out the imprudent’ thing (e.g. lowering rates has meant that savers get punished to bail out foolish home buyers), rest assured, you as a PRUDENT saver, WILL PAY. However with some recent tax law changes, Roth conversions will be available to everyone after 2010; however, they are available to most Americans NOW(there is an income limit currently in place that disappears in 2010). Plan accordingly.
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