The Case Against Roth 401(k)

March 19, 2008 by TFB

To Roth or not to Roth, that is the question. Starting in 2008, like many other employers, my employer also started offering the Roth 401k option in our 401(k) plan. This question of whether one is better off with contributing to the Traditional 401k or contributing to the Roth 401k has been the subject of a lot of debate. Although there is no one-size-fits-all answer, I think for most people the majority, if not 100%, of the contribution should go to a Traditional 401(k). I will state my case against the Roth 401(k) in this post.

The basic premise of a Roth 401(k), and to some extent a Roth IRA, is that of prepayment. You are prepaying the tax now so you don't have to pay tax later. This prepayment concept is not uncommon. For example, buying a season ticket is prepaying for the individual events. Buying a timeshare is prepaying for vacation accommodation. Whenever we deal with a prepayment scheme, we have to assess whether prepaying is "worth it." The same paradigm also applies to Traditional versus Roth 401(k). There are several factors that make prepaying the taxes now not worth it.

1. Fill in lower tax brackets in retirement. I showed in a previous post Commutative Law of Multiplication that if the marginal tax rate at retirement is the same as it is now, the Traditional and Roth 401(k)'s are equivalent. If the marginal tax rate is higher now than in retirement, one is better off contributing to a Traditional 401k. If the current marginal tax rate is lower, one is better off contributing to a Roth 401k. But that applies only to the marginal dollar, which is the last dollar you can shift between Traditional and Roth 401(k). It is not necessarily the case for the entire contribution or the average dollar. The tax system in the United States is progressive and it will probably stay that way. That means that income is taxed at increasing rates as it goes higher. Even if you think the marginal tax rate in the future will be higher, there will still be lower brackets and these lower brackets should be filled with money from a Traditional 401(k).

This chart below illustrates what the tax brackets are in 2008 for a married couple earning $100,000 between the two of them if they file jointly using the standard deduction (click on the chart to see it in full size).

Tax Brackets

* Source: Tax Policy Center

The first $17,900 of income is not taxed because it's taken up by deductions and exemptions. The next $16,050 is taxed at 10%, the next $49,050 at 15%, the next $17,000 at 25%. Because the way a Traditional 401(k) works, the dollars they contribute come off from the top, in the highest tax bracket for their income. After they retire, the dollars they receive from their Traditional 401(k) fill in from the bottom. Even if we assume their marginal tax bracket in retirement will be higher due to tax increases, a large portion of the 401(k) withdrawal may still be taxed at a lower rate than what it was when they contributed the money. This is the same argument raised by a reader on the AllFinancialMatters blog.

Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn't make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth.

If you have a defined benefit pension plan and/or you expect to have a large balance in Traditional 401(k)/IRA, large enough to fill the lower brackets every year, then contributing to Roth makes some sense.

2. Avoid high state income tax. Many people work in high tax states like California and New York today. They work there because there are a lot of well-paying jobs in those states. They won't necessarily retire there because the high taxes take away a significant portion of their retirement income. States popular with retirees like Florida and Texas have no state income tax. If you are working in a high tax state today but there is a chance you will retire in a no/low tax state, contributing to a Traditional 401(k) lets you avoid paying the high state income tax on the contributions. Prepaying the high state income tax now is a dead loss.

3. Leave the option open for Roth conversion in the future. When you leave your employer, you can rollover the Traditional 401(k) to a Traditional IRA, which then can be converted to a Roth IRA at a later time when it is advantageous to you . A Roth 401k or IRA on the other hand can never be converted back to Traditional. With a Traditional 401k, you hold the option, which has value. If you contribute to a Roth, you give up that valuable option. You can decide to convert and pay the tax whenever you are in a lower tax bracket than where you are now. Good times for conversion include:

  • going back to school for a career change;
  • becoming unemployed due to layoffs or burn-out;
  • starting a business (not as much income in the first few years);
  • two-income couple having one parent stay at home or work part-time for a few years after they have kids;
  • a high-income single person marrying a lower-income spouse;
  • taking early retirement;
  • moving from a high tax state to a no/low tax state;

Unless you are sure that your marginal tax bracket will never be lower throughout your career, you should leave the option open by putting money in a Traditional 401(k) and then convert to Roth when an opportunity comes.

4. Avoid triggering phase-outs and AMT. Because contributing to a Roth 401k does not reduce your gross income, you appear to be richer than you otherwise are if you contributed to a Traditional 401k. There are all kinds of income-based eligibility cutoffs and phase-outs in the tax code. When your exceed the income threshold, your tax benefits from those programs are either reduced or eliminated. Some of these tax breaks include:

  • child tax credit;
  • Hope credit;
  • Lifetime Learning credit;
  • itemized deductions;
  • personal exemptions;
  • eligibility to contribute to a Roth IRA;
  • eligibility to contribute to a Coverdell ESA

Think for example the tax rebate from the 2008 economic stimulus package. If a single person earned $90,000 in 2007 but contributed $10,000 to a Roth 401k, he/she is not eligible for the $600 tax rebate. If he/she contributed $15,000 to a Traditional 401(k) instead, he/she is eligible. When your income appears to be "too high," not only do you lose tax benefits, you may even trigger the AMT. Contributing to a Traditional 401(k) will help you qualify for tax benefits and escape or reduce the impact of AMT.

With so many disadvantages, then, for whom does a Roth 401(k) make sense? A Roth 401(k) is good for people in low paying jobs now but expect to have high paying jobs later. Medical doctors in residence programs fit that description very well. They are paid very little while they are in residency but their income is expected to rise substantially higher when they finish the program. Their income will stay high in their career and they will receive a high income after they retire. Prepaying tax now makes sense because they are prepaying at a low rate now and they will avoid paying a higher rate later. College students working part-time jobs or recent graduates working in entry-level jobs are also good examples for taking advantage of a Roth 401(k) while their income (and their tax rate) is low. A Roth 401(k) is also good for people who are already in the top tax bracket and expect to be there forever. If they don't see any chance of being in a lower tax bracket, prepaying tax now will lock in the tax rate so they won't have to worry about future tax increases.

What about the idea of tax diversification? Some advocate both a Roth 401k and a Traditional 401k because the tax rates in the future are uncertain. Diversification is good in general but it doesn't mean automatic 50:50. Just like investing in emerging markets provides diversification, but it doesn't mean you should invest 50% of your money in emerging markets. You still have to decide how much you should allocate your retirement savings between Traditional and Roth just like you allocate a portfolio between developed markets and emerging markets. Tax diversification also doesn't mean you have to do it right now if you are in your peak earning years. There might be better times coming up in the future.

As for me, I'm 100% in a Traditional 401(k). Prepaying tax now is just not worth it.

See also: Roth vs Traditional 401K on Bogleheads Forum.

[Update on May 16, 2008]: There is a follow-up to this post, Roth 401(k) for People Who Contribute the Max, which includes an online spreadsheet that calculates the value of having a higher effective contribution limit in a Roth 401k.

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Comments

38 Comments on The Case Against Roth 401(k)

  1. Debbie M on March 19, 2008 | permalink
    2.  

    Interesting. I love the Roths, but I seem I am one of your exceptions. I have a very good pension plan, I'm in the 15% tax bracket, I now live in a state with no state income tax, and I expect my tax rate to go nowhere but up in the future, mostly because I think tax rates will climb, but I also kind of hope to get big raises one day! (See what the tax rates were in the 1970s, and you'll see what I'm afraid of.)

    Nice analysis.

  2. onthehomefront on March 19, 2008 | permalink
    3.  

    My company began offering the Roth 401(k) in addition to the traditional 401(k) this year. I stuck with traditional even though I'm just starting out in my career and hope that my income will only go up from here. The deciding factor for me was that the company would not be matching anything in the Roth plan, but would continue it's current match structure on the Traditional.

    No sense in giving away free money!

  3. Anonymous on March 19, 2008 | permalink
    4.  

    This is one of the best posts I've read in a long time. I *totally* agree.

    I'm paying federal + state marginal rates of about 43%. I fully expect to have less taxable income in retirement, and to live in a lower-tax state. I can see no benefit to putting money into a Roth 401k in this situation.

    It amazes me that alleged financial experts refuse to recognize that for those of us whose retirement income will come entirely from 401k accounts, using a tax-deferred account can result in a tremendous tax savings.

  4. TFB on March 19, 2008 | permalink
    5.  

    @Debbie – I agree that Roth is perfect for you.

    @onthehomefront – Usually employers don't penalize you for using Roth. If you contribute to Roth 401k, they will still do the match. It's just the match is placed in a Traditional 401k account. You will have your money on the Roth side and their match on the Traditional side. If you are just starting your career and you expect higher income (and higher tax rate) down the road, Roth is still good for you.

    @anonymous – Thank you for the compliments. I'm glad you agree with me.

  5. Anonymous on March 20, 2008 | permalink
    6.  

    I don't agree with this. Kaye Thomas lays out an extensive comparison between Roth vs Traditional accounts. The bottom line is this:

    http://www.fairmark.com/rothira/roth401k/wealth.htm

    The Roth 401(k) is _bigger_ than the traditional 401k. While the nominal contribution limit is the same for both ($15,500), the Roth limit applies to after-tax dollars. This "quirk" of the rules means that while the nominal limits are the same, the Roth is effectively bigger.

  6. TFB on March 20, 2008 | permalink
    7.  

    With all due respect to Kaye Thomas, the first part of his analysis is not valid because it does not take into account the impact on take-home pay. "Saving in a Roth account can make you as much as 53% wealthier in retirement!" Yeah, right, but you also pay 53% more when you contribute. Until the heading "So the traditional account always loses?" it then starts to make sense.

    Yes Roth lets you effectively save beyond the $15,500 cap on Traditional 401k but people who can afford to do so are also in the high tax brackets. So it comes at a higher cost. Can a single person earning $50,000 gross afford to save $15,500 after tax money in a Roth? Not likely. You need perhaps $100k gross income before you hit the cap. When you are at $100k though, your marginal tax bracket is already pretty high. Read what the 3rd comment said. Is it worth it to pay 43% tax in order to save in a Roth 401k?

  7. Anonymous on March 20, 2008 | permalink
    8.  

    Roth 401K's were not available when I was working, so all my deferred dollars are in TIRA/401K's. My pension puts me just inside the 25% bracket. I ran a projection on what my RMD's would be starting in 10 years or so and was alarmed at what I'd have to take out by the time I reached 80.
    Over the next 10 years, I am going to convert TIRA $$ to Roth up to the top of the 25% bracket. That will help reduce the RMD problem, but it will still be there.
    I encourage folks to watch this aspect. A mix of TIRA/Roth seems best; unfortunately, I don't have time to reach the mix I want without forcing myself into the 28% bracket now.

    Paul

  8. Anonymous on March 20, 2008 | permalink
    9.  

    Your commutative math law is wrong becuase it doesn't account for the growth which is taxed on the traditional but not on the Roth. Assume a 40% marginal tax and $100 contribution and 10% growth for 1 year. In the Roth you have $110. In the Traditional you have $110 + 44 (you invested the extra take home pay) = $154. Tax is $44 on the 401(k) and $1.60 on the $4 which leaves you with a net $108.40. Roth wins.

  9. TFB on March 20, 2008 | permalink
    10.  

    Trust me the math law isn't wrong. You assumed the tax savings must be invested outside the 401k. Actually you can gross up your 401k contributions to $166.67 and still get the same take home pay (166.67 * 60% = 100). So grow it by 10% you get $183.33. Tax is $183.33 * 40% = $73.33. After paying the tax, you get the same $110.

  10. Anonymous on March 21, 2008 | permalink
    11.  

    Interesting post, TFB.

    My wife is a teacher and will have a decent pension. I was a federal employee and will have a small pension. The Roth seems to make sense for us, but we are also making contributions to traditional IRA/401ks so that we can take advantage of opportunistic Roth conversions. My wife wants to stay home with our kids for awhile, eventually wants to take a sabbatical. These income-depressing events will be perfect to make Roth conversions more cost-effective.

  11. Anonymous on March 21, 2008 | permalink
    12.  

    quote: Trust me the math law isn't wrong. You assumed the tax savings must be invested outside the 401k.

    Well, I'm assuming you are maxing out your 401(k) in either case. I just used $100 to make the math easier.

  12. Anonymous on March 24, 2008 | permalink
    13.  

    One valuable benefit of the Roth 401(k) is the ability to convert it to a Roth IRA without any tax orcost (once you leave employment). At that point, you can take penalty free withdrawals up to your contributions for any reason at anytime.

  13. TFB on March 24, 2008 | permalink
    14.  

    @anonymous re: being able to rollover to Roth IRA and do penalty-free withdrawals. It's true, although not all will agree that being able to raid your retirement account so easily is a valuable benefit. If one really needs money, I think a 401k loan is a better option than taking penalty-free withdrawals because once the money is withdrawn, there is no way to put it back.

  14. Anonymous on March 25, 2008 | permalink
    15.  

    Are you locked into a one size fits all mentality? It isn't raiding your retirement account if you are retiring before the government says you are of retirement age.

  15. Don on March 31, 2008 | permalink
    16.  

    I'm so glad someone else has come to this conclusion. I got a bit of flak over at AllFinancialMatters over a similar analysis.

    I agree with you. There is a lot of jumping on the Roth bandwagon, and there might be good reason to consider the old-fashioned Traditional savings.

  16. mcfnord on April 1, 2008 | permalink
    17.  

    i track my tax situation very closely. i should hit the 25% rate in September. And that's when I'll push every penny to the traditional self-401k. In a future year where I don't hit the 25% rate, I might convert the traditional funds in to Roth. So traditional acts as a "buffer" to keep me out of the 25% rate, but also soaking up the 15% rate as long as it's attainable. and there's an exit strategy, too: i converted $11k a few years ago. after five years I can withdraw it without penalty, such as in a low rate scenario where i can pay down mortgage that's at a higher rate.

    so traditional wins as an interim to roth when the tax rate is favorable.

  17. 2million 401k on April 2, 2008 | permalink
    18.  

    Nice piece of work. I didn't do the math, but decided to stick to the traditional 401k until our tax bracket was lower. The tax deduction was just too significant to miss out on ;-) .

  18. Lee on April 19, 2008 | permalink
    19.  

    Nice analysis, but I've spent some time thinking about this and want to call your attention to 2 issues.

    1.) If your tax rate at retirement and now is exactly the same, and you max out your 401K, then Roth vs. Traditional are not equal… you are actually better off with a Roth.

    I know WHY you think they are the same. You are saying that (Tax_rate)*(1+r)^years is the same as (1+r)^years*(Tax rate). On that point I agree, but the two are still not the same.

    The main reason is that both Roth and traditional have the same NOMINAL cap in dollars… $15,500 for 2008. Now which one has the highest cap in POST-TAX dollars? That would be the Roth. You can put $15,500 pretax into a traditional 401K, or, if your tax rate is 50%, then you can put $31,000 of pretax into a Roth. Of course, in a traditional case, you'd still have $15,500 leftover to invest in taxable accounts, but do the math and you won't come out ahead if your tax is the same.

    2.) On tax diversification, most people have employer matching, and the matching part is always in pretax dollars (so even if you put money in a Roth, your employer matching will look like it is going into a traditional). Therefore, Roth is actually a nice diversification.

    I concede that the prepayment option is the most compelling case for Traditional. I personally could picture myself going unemployed one year in my 40s, moving to Vegas with no state income tax, and converting the whole thing in a fell swoop.

    It might be good to consider though that right now, Bush has cut taxes to near lows in recent history, and you have to wonder whether we foresee income taxes actually being lower in the future. Also, you are a smart person financially, so I suspect you will be quite rich when you reach 59.5, flush with stocks, bonds, real estate, and lots of other sources of passive and portfolio income. You may very well be forced into the top bracket by your retirement, so if you aren't there now, go ahead and prepay :-)

  19. TFB on April 19, 2008 | permalink
    20.  

    Lee – Thank you for your detailed comments. On the first issue of Roth allowing you to shelter more, it's true, although it only matters if you are hitting the maximum. According to this study by Vanguard, only 10% of people max out their 401k. If you are one of the 10%, then yes, Roth 401k means you can contribute more. For the other 90%, instead of contributing to Roth 401k, they can also increase their Traditional 401k contributions. If you have enough income to contribute $15,500 after tax money to a Roth 401k, it also means your tax rate is high and therefore you are paying high cost for doing so.

    On your second point of having the match in Traditional as tax diversification, I think the match alone is not going to fill in the lower brackets in the future. Like most people in my generation who don't have a pension, the majority of my retirement income will come from my 401k and IRAs. For a married couple, the combined 401k and IRA contribution limit is $41k a year. Unless their income is really high, how many people still have money for investing in taxable accounts after putting in $41k a year toward their retirement accounts? The marginal tax rate might be higher, but there will still be lower brackets that need to be filled.

  20. Scott on June 11, 2008 | permalink
    21.  

    I think I am one of those exceptions too,I have a very good pension plan-I'm in the 25% tax bracket-I currently in NJ.I also think rates have no where but to go in the future.

  21. JoeTaxpayer on June 26, 2008 | permalink
    22.  

    What a great analysis! Glad I found your page. I've come to the same conclusion, and been writing about this as well. The defined benefit pension is important to note (which you did). A great plan can replace 75-80% of one's income at retirement, and could make the Roth more favorable, although with a plan so great, one isn't likely to save much else.
    Only other issue I need to study further, is the impact of Social Security taxation. I wrote an article on that at http://www.joetaxpayer.com/ss.html
    and need to work to tie it in to the Roth IRA decision. Many variables to consider.
    Disappointed in Kaye at Fairmard, although I think the site is great.
    Joe

  22. J on July 30, 2008 | permalink
    23.  

    Even if you were going to go 100% Traditional, it still might be a good idea to make a small one-time contribution to your Roth 401k account as soon as you can. That year will be the start of the 5-year requirement for qualified distribution eligibility for that Roth 401k account (this is helpful, should you change your mind and elect to fund it in the future).

  23. RK on October 16, 2008 | permalink
    24.  

    Thank you for writing this. The government is pushing Roth 401(k)'s so that they can receive your tax dollars today instead of tomorrow! The regular 401(k) makes the majority of investors.

  24. steve on December 6, 2008 | permalink
    25.  

    I need written info stating that a roth ira withdrawl does not factor in to the req min distribution calculations for my traditional ira in the same tax year. These withdrawals will be after the age of 70 1/2. I've searched for hours. Thanks

  25. TFB on December 6, 2008 | permalink
    26.  

    Steve – This article is about Roth 401k, which is still subject to Required Minimum Distributions (RMD). You are asking about Roth IRA. Here are the FAQs on RMD from the IRS. You will see that (a) the RMD rules do not apply to Roth IRAs while the owner is alive; and (b) the RMD from your traditional IRA can only be satisfied by following the rules, i.e. taking the distribution from your traditional IRA. Taking money from elsewhere won't cut it.

  26. ChimRichalds on January 6, 2009 | permalink
    27.  

    I think one person addressed this above but you are all forgetting about the GROWTH of the principal over the years. I am 23 and if the funds I contribute to a Roth 401k are in the market for the next 37 years, I am not going to have to pay tax on either the principal OR earnings. If I contribute $2k this year to the Roth 401k, and I'm in the 15% marg. bracket, I am forgoing $300 in tax savings now. GLADLY! Say the $2k invested today is $10k when I'm 59.5, I have only paid $300 in taxes total, whereas a traditional 401k person would be paying taxes on both the contributions and earnings when he/she is 59.5 which is, no matter how you take distributions, way more tax overall than for a Roth 401k.

    Also a great point was raised that the marginal tax rates today are some of the lowest we will ever see! Pay the tax now, max out to ROTH. http://www.irs.gov/pub/irs-pdf/p4530.pdf

  27. TFB on January 6, 2009 | permalink
    28.  

    Chim – I said "Roth 401(k) is good for people in low paying jobs now but expect to have high paying jobs later." If you fit that profile, Roth 401(k) is good for you. No I did not forget about the GROWTH. If you are going to stay in 15% tax bracket forever, your $300 tax paid today, if allowed to stay in a traditional 401(k) will grow to a size which will exactly pay for the tax on distribution.

  28. Shawn on February 3, 2009 | permalink
    29.  

    Excellent article. My employer just added a Roth 401, so I've been thinking about this issue over the last several weeks. I've been trying to quantify various options under multiple scenarios. For me, the Roth is the likely winner. One cannot overlook the advantage a Roth has for those who maximize their 401 contributions and have defined benefit pensions. This includes higher income people. I calculate that my tax rate in retirement would need to be about 5% lower than my working years to make the traditional 401 a better choice (since I maximize contributions – a very significant effect). My current marginal tax rate is 34.7% (28% federal + 9.3% state – 2.6% federal deduction for state taxes). If I don't move, under current tax laws and planned retirement dates, my marginal tax rate will be 32% when I retire (25% federal + 9.3% state – 2.3% federal deduction for state taxes). Admittedly, I need to closely monitor my income (close to 33% federal rate, AMT, etc) and weigh the likelihood that I will retire to a low tax state, but for now I'm betting on the Roth.

  29. Srini on February 21, 2009 | permalink
    30.  

    Hi

    I love this article about why not to invest in Roth 401K. It covered every topic exactly it should. Excellent article!!! Thanks a lot. I agree 100% with every thing you mentioned and its good to read it in formal writing..

    I contributed 15K in Roth 401K on the pretext of tax diversification. But I am not too comfortable with that logic.. (For all the reasons you listed against Roth). I mean Marginal tax rate vs Effective tax rate even in taxes go high in 20 years form now..

    Any way, I was hit by AMT (lost $1000) because of stupid Roth 401K. Then I Google –> 401K "Roth 401K" AMT

    The first hit I got was your article and its excellent.

    I immediately changed my 2009 contributions from Roth 401K to traditional 401K

  30. J on February 28, 2009 | permalink
    31.  

    TFB: your work is great, both here and on the bogleheads site.

    I'm in the 28% bracket now and use 401k contributions to bring myself down almost to the 15% bracket. I expect to straddle the 15 and 25% brackets when I retire. So for me, a traditional 401k makes much sense.

    However, I haven't factored in the social security taxation that Joe Taxpayer talks about in the earlier comments. Granted, tax changes will occur between now and 25+ years from now when I retire. But have you considered a post on your SS tax thoughts?

  31. TFB on March 2, 2009 | permalink
    32.  

    J – To be honest I haven't looked into issues related to SS taxation because I'm so far away from receiving SS. I'm not familiar with the rules. I vaguely know there is a 50% zone, a 85% zone, and some offsets for earnings while receiving SS — I'm not sure if those are still the current rules. Too complicated. Guessing future tax rates is hard enough. Congress can always invent new rules. For example they can count Roth withdrawal when determining SS payouts or taxation. Roth withdrawal itself is not taxed, but it can be part of means-testing for offsetting other benefits. Too many variations, beyond what my brain cells can handle.

  32. JG on March 11, 2009 | permalink
    33.  

    TFB, Excellent article! It gets to the real meat of the issue as opposed to many other articles that only cover the shallow points of this ROTH vs. Traditional issue.

    I just wanted to add that another advantage of the Traditional IRA/401k over ROTH exists for those of us applying for finantial aid for school for our children. The Traditional IRA/401k option makes one more aid-eligible by lowering your taxable income.

  33. sls on March 25, 2009 | permalink
    34.  

    Great article

    I have a related question re Roth conversion. If you have both a deductible and a nondeductible IRA and want to avoid having to convert the deductible portion, can you roll the deductible IRA into a traditional 401(k)? Then you could convert the nondeductible IRA alone.

  34. TFB on March 25, 2009 | permalink
    35.  

    @sls – Yes, you can roll it into a traditional 401(k). Make sure you complete the rollover before the end of 2009.

  35. JBA on May 19, 2009 | permalink
    36.  

    I know that the issue is traditional 401K vs. Roth 401K… but what I was wondering what if you max your traditional and then additionally (assuming you meet income limitations) open an Roth IRA.

    Just to try to maintain some tax diversification…

  36. TFB on May 21, 2009 | permalink
    37.  

    JBA – Roth IRA is totally fine because it doesn't take away the contribution limit for traditional 401k.

  37. BR on June 11, 2009 | permalink
    38.  

    Great, insightful article. I have pondered this since my employer made Roth 401k available in 2007. Living in NY, my marginal tax rate is ~36%. Totally doesn't make sense doing Roth because from a financial standpoint a) it could trigger a higher current marginal tax rate +AMT, b) at retirement, moving out of NY to a tax-free state provides around a 6% tax hedge, which when combined with a potentially lower bracket at withdrawal time provides a good cushion against overall higher tax rates in the future.

    Admittedly, I am late to this article, but thanks TFB for the good work and your conviction in the responses.

  38. Scott on June 30, 2009 | permalink
    39.  

    The problem now is I think this whole "Great recession" has changed things,uncle Sam had HUGE bills coming due in terms of it's debt, but now with hundreds & hundreds of billions in bailout money on top of that,added to the debt..it's now ENORMOUS future debt levels.

    You can say well they will raise the taxes on the rich only( those families making more than 200K if you wanna call them rich)but I think this whole big thing about raising taxes on the over 200K is just to get use use to it.There is just not enough rich people to make serious dent in the HUGE debt,taxes will have to be raised on everyone at some point…and I think it will be not so far in the distant future.

    Uncle Sam has some serious debt issues 5,10,15 and years beyond down the line,and defered taxes..401ks retirement money etc.adds up to trillions still owed to the goverment,one quick swipe of the pen by the goverment raising income taxes on everyone and the goverment just gave themselves an extra $500 billion
    from defered 401ks and IRAs.

    I have to think this whole recession changed the game..How many zero's can you add to a debt in short period and not have it choke you at some point..Medicare will be first HUGE debt in 10 years that will come due when it runs out of money,thats just the beginning though..

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