Andrew-

Here are some additional commments that readers might find valuable. I will preface them by saying that there really is no "right answer" and each individual's situation will dictate what is right for them.

In your prior post you stated "To take advantage of tax-free growth, why not consider this strategy? Contribute to your 403b at work, and then take the $6,000 in tax savings, and invest that in a 529 Plan for your kids (assuming you have children)".

Think about this for a moment. A client contributes $15,000 to their 403(b) plan which saves them $6,000 in current tax savings - but where is the savings? It is not in their pocket, but in the 403(b) plan.

Meaning, the $15,000 that they invested ($9,000 that they would "net" if they did not contribute to the plan plus the $6,000 that they would have paid in taxes). Therefore, they really don't have the $6,000 to invest at all in any other type of strategy.

Additionally, this money is now locked up until age 59 1/2 unless the client decides to borrow from the plan (maximum of 50% of their account balance or $50,000) and it will be subject to income taxes at their then current rate upon distribution.

If you don't trust the government, I think it is much more likely that they will increase the marginal tax rates and/or change the age of distributions rather than the Roth rules.

After all, the lure to have clients put their money in the Roth 403(b) is to have them pay taxes today. Therefore, unlike the other changes that you mention in the article, I believe that it is highly unlikely that these rules will change. Just like a 529 plan's tax-free growth was uncertain until the Pension Protection Act of 2006, I think it would be against public policy to do anything different for Roth accounts.

Just one man's opinion.

Larry

Zip Code: 11797

thanks. I think I'm with you lawrence. The public will revolt if they pay taxes now and then are told in x number of years that they have to pay it again, especially if it makes or breaks a viable retirement. Marginal rates will be higher when I retire in 30 years....
Appreciate all the help!

Zip Code: 02114

What about the fact that municipal bond interest is supposed to be tax-free? However, you need to include your muni bond interest when calculating your taxable social security benefits.

If your only income is muni bond interest and social security, the muni bond interest could cause up to 85% of your social security benefit to be taxable.

I can definitely see the government pulling a stunt like this with Roth distributions. Who the heck knows what will happen 30 years down the road?

Call me a bird in the hand type of guy.

Zip Code: 01801