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  • Augustine September 5, 2008, 11:40 am

    Joe, the link to the JFP article is broken.

    Yet, I wonder about the certainty of tax rates now and some decades from now. True, the tax rates have remained fairly flat over the past few decades, but with SS busting, an aging population, fall in births, the real possibility of Socialism creeping in, all factors that were not present in the past, at least not as present as nowadays, one cannot be certain of such predictions.

    In light of this, isn’t Roth a good tool to hedge such risks along side pre-tax savings?


  • JOE September 5, 2008, 12:20 pm

    Thanks! I fixed the link. JFP seems to only have current month available. I reposted the article as the PDF I saved.
    I think the 28% and 33% are a risk, but I really don’t see that the 0%/10%/15% brackets will be worse off years from now. Sorry about the link, see that article and the math they offer, they project tax bracket cutoffs and even higher numbers than I offered in my posts regarding pre vs post tax savings.
    Again, thanks for visiting, your comments are always welcome.

  • Augustine September 5, 2008, 12:40 pm


    What do you advise about traditional vs. Roth IRA for supplementary savings (to stash bonuses or anything over the $15500 401k limit)?

    When considering a supplementary IRA, in addition to a 401k, Roth has the advantage that it can also be used as a rainy day fund, thus allowing to save with a single vehicle for both retirement and security.


  • JOE September 5, 2008, 1:40 pm

    Good question, and the right answer for one may differ for someone else.
    If one’s income is high enough to max out their 401(k), they are likely in the 28% bracket, in which case I favor pretax savings. If they can fund the 401(k) but still have no emergency fund savings, and they are not comfortable with the prospect of a 401(k) loan, then I agree (and posted about) the dual use Roth IRA. What I strongly believe is that one doesn’t get through 40 years of a working career with no ups and downs of income. I suggest using the low (say 15%) years to convert from IRA or old 401(k) accounts to Roth. As I continue to post, it takes quite a high saving level to ‘save your way to the next tax bracket.’

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