Do you recommend The Roth IRA or Roth IRA Rollovers?
Important Government position/tax changes to think about.
A. Native Americans/Indian Treaties
Many deals were made. The United States government did not keep any promises, except to take the land, then did not honor any agreements. Instead, it engaged in systematic attempts to kill the people to whom it had obligations.
B. Social Security
Social Security benefits were originally tax free. Then they were made 50percent taxable. Then they were made 85percent taxable. What comes next?
C. Student Loan Interest
Used to be deductible. Without any grandfathering provisions, without any warning to individuals in school, the deduction was eliminated.
D. National Parks Lifetime Pass
For the lifetime of the card holder (who paid a special fee for the card), free admission to National Park Service facilities, for the cardholder and anyone in their vehicle. This was printed on the card. One year later, it was changed by Congress, with no retroactive provisions.
Remember when IRA meant simply Individual Retirement Account? When that program was first introduced, there was no Non-Deductible IRA, Roth IRA, Education IRA, and all the complexity of married/single, income limitations, etc. But, somehow, over the years, things changed, the laws got more complicated, the politicians who instituted the original IRA are now gone, new politicians, who do not remember the original concept, vote for and pass new tax laws.
F. Roth IRA
In 1999, the current tax law was that future withdrawals of principal and earnings from Roth IRA accounts will all be tax free. Great! In the future, new politicians will be elected, who will forget about the "deal", who never understood the agreement, who have no commitment to the tax free status of withdrawals from Roth IRA accounts. When they make deals in Washington, D.C. to balance and pass the annual federal budget, they always say, "Everything is on the table", its all up for negotiation. Sooner or later they may trade away the tax free nature of Roth IRA withdrawals. It is very difficult to do long term tax planning. Maybe it is a good strategy to take the deduction for a traditional IRA now, if you have the option. What adjustments and refinements of this program can we expect over the next 20 to 30 years?
G. Traditional IRA vs. Roth IRA
Remember, a bird in the hand is worth 2 in the bush. If you have a choice, take the tax deduction now for a traditional IRA. Otherwise, the Roth IRA is better than the Non-deductible IRA. I don't recommend Roth Rollovers.