Showing posts with label future. Show all posts
Showing posts with label future. Show all posts

Tuesday, July 21, 2009

Converting an IRA into a Roth? How's Your Crystal Ball?

Ron Lieber of the New York Times recently published an article discussing the unpredictable future of Roth IRAs. At one point, Lieber even proposes the possibility of taxes on withdrawals from Roth IRAs. Lieber predicts that “at the most extreme end, the federal government might try to tax the earnings on a Roth after all, say through the capital gains tax, which is currently at 15 percent for long-term gains but could go up in the next few years.”

You’ll be hearing a lot in the next six months about Roth Individual Retirement Accounts — but not as much as you should about a long-term threat that hangs over them.

Starting Jan. 1, you’ll be able to take a regular IRA, say, one that you have in a brokerage account after having rolled an old 401(k) into it, and turn it into a Roth. You’ll be able to do this no matter how much money you make, though you’ll have to pay income taxes at your current rate on whatever you move. Currently, you can’t make the conversion at all if your household has more than $100,000 in modified adjusted gross income. (That’s a technical Internal Revenue Service term, which it defines in Publication 590, available on its Web site).

Why would you want to make such a swap? Because you think you or your heirs could end up with more money over the long haul by investing in a Roth instead of a regular IRA.

With a Roth IRA, you pay no taxes on your earnings in most instances when you take money out; distributions from regular IRA’s are taxable the same way that income is, though the basic IRA does offer a tax deduction when you first deposit money into the account. The Roth offers no such deduction when you contribute money to it.

So if you think your tax rate will be higher during retirement than it is now, say if you’re fairly young for instance, making the conversion early in 2010 looks sensible.

Continue reading here…

Thursday, May 28, 2009

What's Coming Up For Future 'Tea Party' Protests?

From the LA Times.com:

Last month's "tea party" protests have come and gone but are not forgotten. New protests are already brewing, some maybe this holiday weekend, others probably for July 4, with text messages and tweets flying back and forth.

The phenomenon in many ways is familiar in American political history -- a kind of eruption, an incoherent lashing out by people angry over taxes and spending and big government and bigger spending. And the uncertainty of their current lives.

Contrary to some cable news channels, we found "tea party" protesters often to be just as angry at Republicans in general and George W. Bush in particular as at the awe-inspiring size of the Obama Democratic administration's spending plans.

Historically, these protests have fizzled without some political personality to coalesce around -- a Gene McCarthy, a John Anderson, a George Wallace. A Ron Paul even.

Our Times colleague Richard Fausset spent a good deal of time recently with "tea party" participants. And we asked him to go through his notes and thoughts and share the experiences with us. Here's what he told us:

The people I talked with had a variety of targets. This doesn’t mean they went easy on Obama, however. One fake campaign sign showed a picture of the president and a certain hirsute German philosopher: It said: “Obama Marx ’08 – BFF.”

Another sign featured a picture of Obama in a Soviet officers’ uniform and the words: “JUST SAY NYET.”

“Hey, is that available as a T-shirt?” a guy asked the sign holder. “It will be soon,” came the reply.

It was somewhat surprising to hear from numerous folks that their beef wasn’t just with Obama’s economic policies. Time and again, people said they'd been just as upset with what they saw as profligate spending under Bush.

Tim Lee was typical. A councilman from suburban Atlanta's Cobb County. “The Republicans,” he said, “were doing just as bad for eight years.”

Lee’s home county, like many municipalities around the country, has been facing its own economic crisis, forced to cut millions from budgets to match anemic tax revenue. As for the national economy, he said the federal government should have “let it crash” instead of offering bailouts to troubled industries and a big stimulus package.

We would have picked ourselves up and moved on,” Lee added. “The pain would have been short-term. Now we’re taking the long- term pain of having to pay all that money back.”

John Pettit, a 48-year-old contractor, hoisted a sign that read “Chains – we can count on.” Pettit said the nation was “headed for bondage” with its reliance on government borrowing. Pettit’s concerns about government policy didn’t start with Obama or the current Congress, he said.

It went all the way back to the New Deal. Although he said the new guys were part of that long, sorry history by spending money that they simply didn’t have. “Hey," Pettit said, "good habits are learned in bad times. And bad habits are learned in good times. Right now, Congress isn’t learning.”

The rallies typically have a temporary stage, a parade of local officials speaking, radio DJs and minor celebrities rallying the crowd.

What emerges in thought later is the lack of a unifying figure around whom the "tea party" folks can rally.

It will be interesting to see if someone emerges as organizers roll out plans for the next round of protests. If it is to be effective in the long term, it seems the movement will need a decider: not just a public figurehead, but someone who can focus and modulate the multifarious blob of themes and emotions that seem to drive this fascinating middle-class revolt.

Someone, in short, who can tap both the thoughtfulness and anger behind the movement, the patriotism and Americans’ natural skepticism of government power … plus the anti-Obamaism, the call for a fair tax, the fear of new controls on carbon emissions. All that and more.

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