Roth IRA is a Ripoff
Since this is a finance thread I've decided to voice my opinion that a:
Roth IRA is a Ripoff
I will be comparing it to contributing to a regular non IRA account, not a traditional IRA, which is much more complicated to analyze
1. With a Roth IRA you are immediately taxed on your contribution at a level which is the same as your income. So for many (considering an individual return - not much difference than joint) that will be 22% - and many states will get more, for example .....8%. This means if you make a $5,000 contribution at this income level you will immediately owe an extra $1,500. Typically, you will be charged tax when you are fairly young and your income is at or near its highest level
2. A contribution to a regular non IRA account is not taxed in any way
3. You may have to pay penalties on the earnings of a Roth IRA if you withdraw any amount before age 59.5
4. You never have to pay penalties on any withdrawal from a regular non IRA account
5. The Roth IRA's main selling point is that there is no tax when you withdraw after age 59.5. But if for example, you are invested in something where there is very little trading in a non IRA account your yearly capital gains tax is minimal.
.....And when you do withdraw when you are older and either not working or not working much the capital gains tax at the Federal level has been greatly reduced, so you will either have to pay only a minimal amount or zero to the Feds.
.....You will owe state tax on capital gains if you are living in a state that taxes income but if that is all that you owe that is not likely to be much, since your income at least for most when you are in your retirement years is considerably less
So, to summarize, the only real benefit to a Roth IRA compared to a non IRA account is that you can avoid capital gains taxes when you withdraw and they are likely to be minimal with a non IRA account if you actively manage your investment focusing on tax considerations
Against that is the tremendous disadvantage of paying all that tax when you contribute to it
what a terrible, terrible deal
it's possible I missed some advantages of the Roth IRA but I don't think so. let me know if I did
__________________
believe only half of what you see.....and nothing that you hear..................Edgar Allan Poe
Last edited by Half Smoke; 04-25-2019 at 10:29 AM.
|