Never, ever trust a politician who promises you something you cannot hold in your hand here and now.
So hold on to your wallet. Congress has many options when it comes to tapping this vast reservoir. It could eliminate the deduction altogether or just for top earners, further restrict the amount that is deductible (currently $17,500; for those over 50, $23,000), start taxing retirement savings growth, or take back the part that has grown tax-free.
In the throes of a retirement savings crisis, none of these options is appealing. But that last one is most troublesome. At stake is any savings that has accrued tax-free in a Roth IRA.
One reason I did not convert en-masse to a Roth even though under certain "specific conditions" I could have is that in a conventional IRA (whether a Sep or "personal" IRA) you contribute to it on a pre-tax basis but all your withdrawals are taxed when you make them.
Therefore, the government is going to get to tax you tomorrow; they have not made you a promise of future action (in fact, they promised you'd get taxed!)
The Roth, on the other hand, you pay into with post-tax dollars but the capital gains are tax free later on.
Well, in theory they are anyway, because you were "politically promised" they would be.
Unfortunately the US Supreme Court has ruled repeatedly that retroactive tax changes are legal even when you make a decision predicated on that former policy and get burned as a result.
Therefore, there is exactly nothing to prohibit the government from revoking the tax preference on capital gains in a Roth, and when the government does so you will get gang*****d because you intentionally invested a smaller amount of money originally (diminished by the amount of tax you paid on the contribution) and thus your compound earnings, such as they are, will be dramatically short of what they would have been in an traditional IRA.
Further, the traditional IRA is taxed as ordinary income, which is the worst rate to begin with, so losing "capital gains" preference is a big fat nothingburger since you weren't going to get it in the first place.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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