Tax Guru-Ker$tetter Letter
Thursday, April 22, 1999
Roth IRAs Are Risky
This letter was printed in the April 22, 1999 edition of the Wall Street Journal
Dear Wall Street Journal:
Karen Hube's April 5 article on the debate over Roth IRAs was good. However, it didn't mention the big reason I have consistently advised my clients to steer away from Roth IRAs; Congress's inability to leave the tax code alone. Anything with a five year waiting period for the payoff is too risky. Congress has a long history of reneging on promised tax breaks. Just ask Social Security recipients who were promised their benefits would be tax free and now have to pay taxes on 85% of them.
Our leaders in DC are so generous now with the mythical budget surplus. When the economy turns, and the flow of tax revenues slows down, you can bet that certain tax deductions will see the hatchet. The Roth IRA may not be eliminated altogether; but at a minimum, its tax free status will be removed for evil rich folks. For Social Security recipients, the definition of evil rich is any couple earning over $34,000. While many may consider me to be overly skeptical, my 23+ years as a professional tax advisor have taught me the dangers of relying on promises from Washington for my clients' financial well being.
Kerry M. Kerstetter