If you have a mutual fund for your family, these tax cuts made you better off. If you have an IRA or a 401(k), these tax cuts will help provide a better retirement.How do I know he is fudging the truth here? Because I have a Roth IRA, which by its very definition produces increases in value at no tax to me. That's what makes the Roth IRA such a splendid thing. So, do I need tax cuts for a program that is already not taxed? Nope. Moreover, unless you are pealing out payments from your traditional IRA, you are not showing any windfall that would be taxed in the first place. Again, no benefit by this bill. So, what's the actual consequence for this act? We place the ever expanding debt burden on future generations to make the W, Rove and Co seem artificially magnanimous when in actuality, they are adding to the burden by costing us the interest instead of paying for things like, oh, let's say the war on terror, on credit. Sucks to be us, no?
Wednesday, May 17, 2006
Here's How To Tell When A President Is Lying and Realize He's Screwing Unborn Americans In The Process
Today, in a heavily publicized expensive event sponsored by our American Taxpayer Dollars, the President put off paying for his gigantic increases in government expenditures shoveling the burden on future presidents (to make them look bad, I'm sure) and generations. And while doing it, produced another malfeasant statement that could be viewed as a lie.
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The Roth IRA's 'carrot' is not particularly good value
Roth IRAs were designed to accelerate tax payments to the government. That was the intent of the Roth legislation, to get people to pay more taxes now. In this Roth's were effective since Roth dollars are invested after tax.
Regular IRAs are pre-tax investments. Yes, you pay taxes when you take money out of a regular IRA, but you also had more more going in to invest. More money invested means larger 'profits,' if there is a favorable change in your tax bracket in retirement. You must decide if this latter a sound assumption to make.
To illustrate, suppose your tax rate is 50% (assume any rate you like, this still works):
You have $2 income.
If have $2 income put into a Roth, after tax your investment is $1. (After paying the 50% tax on $2.)
If you put your $2 into a regular IRA, your investment is $2. (Pre-tax.)
Both investments double over time. How much money do you net after tax from each investment?
Roth, $1 x 2= $2. (No tax.)
Regular IRA, $2 x 2 = $4 - $2 = $2. ($2 after 50% tax.)
Superficially, it looks like Roth and regular IRAs are investment neutral.
But realistically, your tax bracket is likely to be lower in retirement than it is today. In fact, the IRS tax-advantages senior citizens right out of the box. Try filling out your 1040 as a 65-y.o. and you'll see how this works.
As a retiree, you also get to decide at what rate your receive your income, unlike today when you work to make the big bucks and pay taxes on them currently. Consider that in retirement you'll probably be living in paid up housing, paid up yacht, paid up car, you need less income to maintain your lifestyle. In retirement, and needing less income, controlling your taxable income by deciding how fast to receive it can reduce your taxes.
Roth IRAs only look like a good deal if you expect to have more income in retirement, and subsequently expect to pay taxes at a higher rate than you do today. It's up to you to decide if that's a sound assumption to make today.
He who pays in advance pays twice. - Benjamin Franklin.
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