Fears That Taxes Will Rise: Protect Yourself
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credit: Paul Keleher
Scary stuff from a recent CNN report about the inevitability that taxes will rise: Janice Revell from the Money Magazine is sure that taxes have been cut too much, too quickly and historical analysis makes it look like this is a situation that can’t last. She thinks proof is there even as recently as 1980 when tax rates for the top tax brackets were double what they are today.
This means that Revell believes you should factor in a higher tax rate when planning for your financial future. So what can you do to protect yourself against future tax increases? The best way to deal with this is to add money to a Roth IRA. That’s because you pay tax on those deposits now and not later when you withdraw it - it’s the reverse situation for traditional IRAs and 401(k)s. At the moment, people with a gross income of less than $116,000 a year are able to add $5,000 to a normal Roth, and anyone, regardless of income, can add up to $15,500 to a Roth 401(k). So if you follow Revell’s opinion that tax rates will only rise in the future, that’s the best way to make sure you don’t lose out come retirement.
Tags: 401k | IRS | Retirement | Roth IRA | Taxes
This entry was posted on Thursday, June 5th, 2008 at 3:45 am and is filed under Taxes. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
