Saturday, April 10, 2010

How much do you trust Congress?

I receive a regular email update from Ric Edeleman of Edelman Financial Services. The following Q&A from his last update is quite telling:


Q&A: Roth IRA Conversion

Question: Regarding Roth IRA conversions, what is there to prevent the government 10, 20 or 30 years from now taking these Roth IRAs and changing rules and making them taxable, either all or in part, or making them subject to the AMT?

Ric: There is nothing preventing Congress from doing that. That is one of our objections to the Roth IRA and specifically to the Roth IRA Conversion. Congress says Roth IRA withdrawals are tax-free, but we get a new Congress every two years.

Planning to retire in 20 years? That’s 10 Congresses from now. If the government needs more revenue, a future Congress might decide to tax the money held in Roth accounts. You can even argue that this is why Congress allows Roth conversions in the first place: The conversion does not necessarily lower your taxes, but it does accelerate your payment of them. By getting you to convert, Congress gets the tax revenue now.
Clever, huh?

Do you trust Congress to honor its promises? The more you do, the more confident you can be about putting money in the Roth IRA. Personally, I am not terribly confident.

Indeed. I am not sure I have ever been able to put much faith in Congress keeping their word; but given their shenanigans as of late, my level of trust for them has descended even further, if that were possible.  Something to think about as the blessed day of April 15 approaches.

2 comments:

JD Curtis said...

Do you trust Congress to honor its promises? The more you do, the more confident you can be about putting money in the Roth IRA. Personally, I am not terribly confident.

I don't trust any of them as far as I could throw them. unfortunately, with President Soetoro now at the helm, I believe such retirement plans will eventually go to the wayside and the gubmint will wind up with all of your money.

In all fairness, had McCain won, I think we would still be on the same path only on a slightly slower rate.

feeno said...

No.

But I have spent my whole life not wanting or expecting anything from our Govt.

I do like the concept of what JFK said about "ask not what your country......." But we wouldn't have to give so much if people weren't expecting so much for nothing.

I'm glad I enjoy what I do because I'll be doing it for a long long time. But am grateful that I can work.

Thanks Crusty for the kind words at my place.

Peace, feeno