Should You Convert to a Roth IRA in 2010?

Search the internet for “Roth IRA Conversion 2010” and you will find pages and pages of advice telling you that the Roth conversion is a sweet deal.

But is it?

Well first, WHAT is it? Here’s a simple overview of what would be involved:

  • Fill out some forms for the government
  • Send the government a big chunk of your retirement savings
  • Rejoice upon the how the government will not tax your Roth distributions in the future!

Pretty swell, huh?

Voice of Devil’s Advocate: Hey isn’t this the same government that could go bankrupt at any minute? Haven’t you seen the film, I.O.U.S.A.?
Voice of Popular Advice: We’re the most powerful country in the world! How could we go bankrupt?
Devil’s Advocate: Hmm… you should just watch the film I.O.U.S.A. In it, the former chief accountant for the government explains how it is on path to go bankrupt in less than 10 years.
Popular Advice: Well I’m sure the government will figure out some way to stay afloat!
Devil’s Advocate: Yes, they will invent new taxes, increase existing taxes, inflate currency, and break promises… such as the promise to not tax your Roth distributions.
Popular Advice: When has the government ever broken a promise to not tax us?
Devil’s Advocate: First, there was the promise to never tax individual income. They broke that. Tax rates have been rising steadily since. Then there was the promise to create a retirement insurance fund, called Social Security, where funds would be waiting for you in retirement and the distributions to you would not be taxed. Then they broke that promise by taxing SS benefits. While they were at it, they never created a fund and operated a Ponzi scheme instead.
Popular Advice: What’s on TV tonight?

[end Jeff’s mental theater]

Since when do we respond to a lying thief’s claim that “Send me money now and I’ll never rob you again” by sending him money?

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