Roth taxed in the future?

[disneysteve]

Originally Posted by cptacek

if you are taxed on the earnings, then your Roth IRA just became a plain-old, typical mutual fund. So, if the laws change, it is worse than if you had invested in a traditional IRA or 401k, because at least with those you got the tax savings up front.

With a non-retirement mutual fund account, my money doesn't grow tax-free. Each year, I am taxed on dividends and capital gains. With the Roth, even if the earnings are ultimately taxed, I will have gotten years of tax-free growth and compounding.

[MonkeyMama]

Originally Posted by disneysteve

The topic has come up, but I think the problem is I'm the only fiscally sound employee in the practice. The 3 full-time employees all live paycheck to paycheck and probably would not sign up for a 401K. The other doctor spends money like water - leases a luxury car every 2 years, shops online constantly, goes to concerts, bought a shore house recently, etc. He is 4 years older than me and is still repaying student loans, while I repaid mine over 3 years ago (similar original debt amounts). I've built a mid 6-figure portfolio. He's saved next to nothing. So the appeal of setting up a 401K seems to be lost on my coworkers.

You can do a PSP without 401k. Whoever owns this business really needs to do so - where is his CPA? LOL. Granted, it does not work well for every office so I try not to over-generalize, as I Do not know your situation.

But seriously, push the tax savings angle. I am not sure if you are a partner or an employee, but like I Said my boss has not been able to NOT talk anyone into the PSP. Benefits are clear. But I am not sure how it is in NJ, it could be a state thing too... I just don't know.

We have a PSP with no 401k in my office, a few of my clients do. I have one client where the doctors all put money in 401ks and the staff doesn't. They have the choice but they don't. Since the PSP & 401k can be rolled in one it is not a biggie if you were the only one to partcipate. Just FYI. Not a lot of costs involved to add the 401k for one person...

[disneysteve]

Thanks MonkeyMama. I'll look into that.

[cptacek]

Originally Posted by disneysteve

With a non-retirement mutual fund account, my money doesn't grow tax-free. Each year, I am taxed on dividends and capital gains. With the Roth, even if the earnings are ultimately taxed, I will have gotten years of tax-free growth and compounding.

You are right. So, unless they retroactively enact a tax on the capital gains and dividends, you are still better off than a with regular mutual fund.

[bjl584]

I personally doubt it, but then again no one ever thought that the government would take down the firewall that protected social security from being mingles in with the general fund either. You just never know what the govt. might do, but I doubt that ROTH's will be subject to taxes. The money was already taxed before it went into the Roth, so taxing it on the way out would be double taxation and illegal.

[jIM_Ohio]

Originally Posted by disneysteve

Sure. Just like SS has changed and will change more in the future. All of these government-sponsored plans are subject to the whims of Congress. We can only invest based on the knowledge we have since none of us has a crystal ball.

Betting on future tax rates is not a game I like to play. We have little control over the issue. Indirectly I will NOT vote for the president or congressperson which took the promise away.

People with Roth's which have a high tax free withdraw will likely not need SS checks, and as such, will probably see SS checks taxed much higher than they are now.

What we will see is the middle trax bracket expanded downward, or the upper tax brackets expanded downward. People which make the same amount getting taxed more in the future.