<#-- Rebranding: Header Logo--> <#-- Rebranding: Footer Logo-->

Should I hold off on investing income within my Roth IRA due to Trump's desire to lower taxes?

Since Roth IRAs are funded with after-tax dollars, should I factor in Trump's inclination to lower taxes to decide whether to keep investing inside my Roth IRA? If the lowering of taxes is indeed inevitable, wouldn't I be better off contributing my income to a pre-tax retirement account, at least until taxes are lowered?

Investing, IRAs, Taxes
Answers
Sort By:
Most Helpful
February 2017

That is a great question. Very few people actually do the math. If you assume the same tax rate, the amounts are actually the same. I like to have a mix of accounts for this very concern and for flexibility, but if I had to pick without more detail, I like the Roth.

If our national debt was zero and we did not have so many baby boomers using Medicare and Social Security, I might agree with you a little more, but a president only serves for 4 years (I am not making a political statement) and unless you are in your 60's, the accounts are most likely for the long term.

If you open an IRA now, you will have a tax deduction and in theory, could invest those savings, but few do. You also have indirect factors to look at like, RMDs -- required minimum distributions. This forces you to pay the taxes in retirement. With the Roth, you can just leave it alone and pass it on to your kids. The increase in adjusted gross income (AGI) could affect other tax-related things, like the Medicare surtax, costing your more in taxes.

So, this is very client specific and you are making an educated guess at the future, but unless you are close to retirement, I would error on the side of the Roth.

Good Luck!

Mark Struthers CFA, CFP®

February 2017
February 2017
February 2017
February 2017