Why I reject Roth - Never trust the government

[George Lucas]

I often read and hear tired arguments about whether it’s better to save in a traditional retirement account or a Roth account, when to do conversions, when to make use of backdoor conversions, etc. I have a simple thesis against Roths: there is no guarantee that the government won’t tax Roths in the future.

If you don’t think this can happen, consider Social Security. Social Security was originally not taxable. Today it is treated as income and is taxed. Why? Because fuck you that’s why.

‘The government won’t tax retired people’ or ‘I’ll get grandfathered in’ is all cope. You will be raped and fucked by the government no matter what you do or who you are.

The best way to say ‘fuck you’ to the government is to legally defer paying taxes as soon as possible. This includes investing in traditional retirement accounts whenever possible. This means only contributing to Roths when all other tax deferred options are exhausted.

In 2022, Biden signed the SIMPLE 2.0 Act into law, requiring catch-up contributions to 401 (k)’s to be Roth contributions. They are herding sheep to the slaughter. Once all that juicy Roth money is built-up, the government will strike and tax Roth accounts. The government has eyes on traditional tax-deferred accounts and will continue to whittle away at our rights to contribute to them.

Do not be fooled by people making fancy mathematical analyses to get you to pay more tax today in hopes of saving tomorrow. The government can stay retarded far longer than anyone will remain solvent.

 

[byron]

there is no guarantee that the government won’t tax Roths in the future.

Oh man, I had this argument with a financial planner decades ago. She said, "they can't tax it" and I said, "well, they can, but they're promising not to" and she insisted, "no! They can't!"

I ended up having to back off because my wife clearly thought I was being an asshole, but I think about that conversation to this day - just the naivety of believing the government can't do a thing it wants to do - thinking they can't or wont change the rules.

I could have respected her if she'd said that taxing it would be very unpopular and was thus very unlikely ...but no, she genuinely believed there was some magical force that would prevent them from doing it.

 

[Agamemnon Busmalis]

I use a Roth IRA basically as a high-yield brokerage/savings account. Only pay tax on gains if I take it out within five years, which I did as part of buying my house.

Otherwise for retirement zero Roth. I never really believed these wouldn't be taxed for the same reasons as you mentioned with Social Security. The tax savings now also let me contribute more now to grow over an extended period of time resulting in a larger amount available at retirement even after tax.

 

[We Are The Witches]

Oh man, I had this argument with a financial planner decades ago. She said, "they can't tax it" and I said, "well, they can, but they're promising not to" and she insisted, "no! They can't!"

I ended up having to back off because my wife clearly thought I was being an asshole, but I think about that conversation to this day - just the naivety of believing the government can't do a thing it wants to do - thinking they can't or wont change the rules.

I could have respected her if she'd said that taxing it would be very unpopular and was thus very unlikely ...but no, she genuinely believed there was some magical force that would prevent them from doing it.

Maybe she didn't mean it literally.

Some people are like that, they like hyperbole and claiming things to an extreme point for the purpose emphasis, but I guess you know your wife.

 

[JohnnyG]

The tax savings now also let me contribute more now to grow over an extended period of time resulting in a larger amount available at retirement even after tax.

The increased initial investment is perfectly offset by the taxes on that larger balance, over any time horizon and at any rate of return. In any given year you will be ahead of the Roth by exactly the amount you owe, unless your future tax bracket is lower.

A low earner who expects to have a large income-producing nest egg some day should want to pay taxes now (Roth), while a high earner may want to defer taxes (Trad). My dad always recommended Roth no matter your income, with the cynical view that future tax rates will inevitably go higher. OP takes the cynicism a step further.

But without moving brackets or changing rates, any value in the Trad column minus the tax rate matches the value in that year's Roth column:

 

[Audit]

The increased initial investment is perfectly offset by the taxes on that larger balance, over any time horizon and at any rate of return. In any given year you will be ahead of the Roth by exactly the amount you owe, unless your future tax bracket is lower.

A low earner who expects to have a large income-producing nest egg some day should want to pay taxes now (Roth), while a high earner may want to defer taxes (Trad). My dad always recommended Roth no matter your income, with the cynical view that future tax rates will inevitably go higher. OP takes the cynicism a step further.

But without moving brackets or changing rates, any value in the Trad column minus the tax rate matches the value in that year's Roth column:

View attachment 6760767

What about present mid-earners (>22% tax rate) who want to use their nest-egg as a down payment on a house? Aren't there sizeable penalties for early withdrawal from a ROTH IRA? Let's assume a 5-10 year future outlook. Long term capital gain tax rates in the US are far lower than income taxes (15% for most people), so this could also shift the balance away from ROTH.

 

[Prokhor Zakharov]

Oh man, I had this argument with a financial planner decades ago. She said, "they can't tax it" and I said, "well, they can, but they're promising not to" and she insisted, "no! They can't!"

I ended up having to back off because my wife clearly thought I was being an asshole, but I think about that conversation to this day - just the naivety of believing the government can't do a thing it wants to do - thinking they can't or wont change the rules.

I could have respected her if she'd said that taxing it would be very unpopular and was thus very unlikely ...but no, she genuinely believed there was some magical force that would prevent them from doing it.

The government can literally do almost anything, and anything that it explicitly can't do is just a law, judgement, or amendment away. So "Never" is really not a word to use with the government. The amendment making prohibition legal is all you ever need to know to realize that the government and the people in it and those that support it can be amazingly retarded.

 

[byron]

The amendment making prohibition legal

That's a really good example of how the citizenry's understanding of government power has changed for the worst. In 1920 when people wanted to ban alcohol, they looked at the constitution and realized, "damn, the government doesn't have this power - well, we'd better amend the constitution to give it to them."

Decades later when they wanted to ban drugs, they just did it. They used "interstate commerce" as the excuse, but it really is just an excuse - otherwise drugs would be legal within a state, and only transporting them over state lines could be a federal crime.

 

[Mix]

That's a really good example of how the citizenry's understanding of government power has changed for the worst. In 1920 when people wanted to ban alcohol, they looked at the constitution and realized, "damn, the government doesn't have this power - well, we'd better amend the constitution to give it to them."

Decades later when they wanted to ban drugs, they just did it. They used "interstate commerce" as the excuse, but it really is just an excuse - otherwise drugs would be legal within a state, and only transporting them over state lines could be a federal crime.

it was more of an excuse to let asians push kava/kratom as the drug of choice which is literal heroin-tea that tastes like dirt at $25/shot. trouble is, you literally die if you consume beer with it and if you've ever been at an event, you'll notice the sweet putrid smell of rubber as they're smoking meth in the parking lot to combat the drowsyness of the opium. you'll never see an old fart at these events, only woke trannies who want to scam you with their bracelets, firespinning, and $25 vegan plates served by peopel of color, aka gay niggers and trannies. one drink of this crap will cripple you and you'll snap outta it 2-3 days later at the same 24/7 'cafe' with UV lights burning out your retinas as you've just been raped by the faggot management. Beer drinkers are ousted with shame and hate from their events as they consume every fucking no-name research chemical they whipped up in their garage. As soon as you drive away from the event, you'll likely be pulled over by a couple dozen cops.

 

[Agamemnon Busmalis]

But without moving brackets or changing rates, any value in the Trad column minus the tax rate matches the value in that year's Roth column:

See that makes sense, I pay higher brackets now and expect to have lower tax rates when I retire (if I retire...).

 

[JohnnyG]

What about present mid-earners (>22% tax rate) who want to use their nest-egg as a down payment on a house? Aren't there sizeable penalties for early withdrawal from a ROTH IRA? Let's assume a 5-10 year future outlook. Long term capital gain tax rates in the US are far lower than income taxes (15% for most people), so this could also shift the balance away from ROTH.

Classic old man financial advice would be that you shouldn't touch the nest egg, just let it build toward its intended purpose and save for the mortgage separately. But aside from that, I don't think capital gains rates are relevant here...both types of IRA pay income tax rates, it's just a matter of when (which is why the government is ambivalent).

[schizophrenic rant]

Sir, this is a Northwestern Mutual regional branch office...are you looking to start planning for your financial future?

 

[MG-34]

They can, but I feel this would be as poisonous as taxing unrealized gains. The Politcal party that does it will likely commit political suicide in the following election season.

 

[winterfag]

I agree, Cabin Fever was shit

 

[Angry Shoes]

it was more of an excuse to let asians push kava/kratom as the drug of choice which is literal heroin-tea that tastes like dirt at $25/shot. trouble is, you literally die if you consume beer with it and if you've ever been at an event, you'll notice the sweet putrid smell of rubber as they're smoking meth in the parking lot to combat the drowsyness of the opium. you'll never see an old fart at these events, only woke trannies who want to scam you with their bracelets, firespinning, and $25 vegan plates served by peopel of color, aka gay niggers and trannies. one drink of this crap will cripple you and you'll snap outta it 2-3 days later at the same 24/7 'cafe' with UV lights burning out your retinas as you've just been raped by the faggot management. Beer drinkers are ousted with shame and hate from their events as they consume every fucking no-name research chemical they whipped up in their garage. As soon as you drive away from the event, you'll likely be pulled over by a couple dozen cops.

What the fuck are you on about we're talking about investing.

 

[reptile baht spaniard rid]

In 1920 when people wanted to ban alcohol, they looked at the constitution and realized, "damn, the government doesn't have this power - well, we'd better amend the constitution to give it to them."

The key to remember about Prohibition is that almost all the states had already done it by the time the amendment was passed. It was more of a fait accompli than something handed down by the feds.

For investing, there's only a few things you can control - how much is taxed today, and how you allocate it.

The biggest real advantage of the Roth today is that it can be inherited in advantageous ways, which isn't really a major advantage for retirement. And a dollar in the hand is better than a future dollar in the bush.

Also using tax-deductible investments like a traditional IRA or 401(k) reduces your income NOW which not only reduces your tax, it qualifies you for other advantages. You can use an IRA/401(k) to get your income low enough to qualify for Obamacare, for example.

The other thing the Rothheads forget is that the first $x each year is already tax-free. So some of it gets discounted there, too.

Roth as a way to "trick" young workers to start saving is a powerful use of it, given that you can say "you can get your contributions back out anytime".

 

[NOT Sword Fighter Super]

Oh man, I had this argument with a financial planner decades ago. She said, "they can't tax it" and I said, "well, they can, but they're promising not to" and she insisted, "no! They can't!"

I mean, how many time did Biden promise he wasn't going to pardon his son?

Promises from politicians don't mean shit.

 

[Éamonn Ceannt]

How fucking dare you reject Roth! He was in the IRA with my dad and he said Roth was solid!

 

[Sho'nuff]

The limits on Roth contributions means it should be a secondary retirement device.

Financial people never mention this, which always makes those "Roth ira or die in poverty" people seem like snake oil salesmen. And honestly the tax "benefit" is pretty misunderstood so I don't understand how financial experts push the Roth so hard unless they simply don't understand or more presumably, they are snake oil salesmen.

 

[reptile baht spaniard rid]

Financial planners are all scammers, even the honest ones.

You gotta learn enough to deal with it on your own.

 

[Prokhor Zakharov]

Financial planners are all scammers, even the honest ones.

You gotta learn enough to deal with it on your own.

Unless they are a fiduciary. Then they are legally obligated to do what is in your best financial interest, literally.