Friday, January 2, 2009

Hogan v. McQuarrie on Roths

"A silver lining in the dark cloud over Wall Street is the chance to convert your traditonal IRA to a Roth IRA, the only retirement account whose withdrawals won't be taxed after you get your gold watch. Uncle Sam taxes conversion amounts as ordinary income (not at capital gains or dividend rates) in the year of conversion. So, assuming you own recently devalued securities that you think will bounce back, why not pay taxes on a lower total? Let's face it: Tax rates are as low as they're likely to go in the near future and Roth money isn't subject to annual distributions forced on regular IRAs, 401(k)s and sundry other government-defined account types. ... A much more difficult--actually, impossible--question to answer is whether you can lower your net tax bite by paying the taxes on the conversion sum now. ... The problem is you can't know your pre- and post-retirement tax brackets and rates of return over time. Congress changes the rules every year--even without major tax legislation--improving outcomes for some taxpayers and penalizing others", my emphasis, Mike Hogan (MH) at Barron's, 8 December 2008.

MH is a fool. Or an IRS plant. He either doesn't read Barron's, or ignores it. MH realizes: "Congress changes the rules every year". So why pay taxes now? See my 23 November and 16 December 2008 posts:

1 comment:

Anonymous said...

hello i.a.,

I understand where you are coming from, but imo roth iras are a scam to separate people from their money for a long time. When you buy stock you are just giving the maggots your money to steal. The cash out of all 401K accounts and hide the money, I agree, taxes will never be lower ever again. Gold buried in the barn is better, imo.