Thursday, April 19, 2007

Roth 401K vs. Traditional 401K

I found the following article (Meet one dissenter from Roth 401(k) rah-rah chorus) to be something that made me think about Roth products in a slightly different way. This article points out that when you are investing in a Roth product you need to think beyond the points of what your effective tax rate is now against what it will be in retirement. The author points out that many things can happen with tax laws between now and when you retire. Her opinion about giving up a sure thing now for a promise in retirement brings to light an interesting risk. The best point in the article is that we are living in a time of huge tax deficits. Many people are out there saying that you should invest in Roth products now because tax rates are at a low and are sure to go up. Who is to say that your Roth product is not going to be the government's answer to the tax deficit in 40 years? I do not see this happening and I hope this would never happen, but it does make you think about how uncertain the future is.

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