Traditional IRA’s looking better and better.

When you look at whether you would like a traditional IRA or a Roth there are basically three considerations.

  1. Do you expect to be in a higher or lower bracket when you retire (making more or less money)
  2. Do you expect overall taxes to be higher or lower when you retire
  3. Do you have extra money to put in (putting in dollars after tax effectively lets you put in more)

Lets look as these issues one at a time, based on the current financial disaster

Will you be making more

In this instance, I am looking at what the feds are doing as far as monetary policy. By injecting huge amounts of dollars, they are going to cause massive inflation. It is economics 101. According to this story, we are already into it about $1.8 Trillion. Assuming a population of 300 Million, we end up with about $6,000 for every man, woman, and child. Um, Mr. President, could you exclude me from the plan and just send me the $30k for my family? Especially seeing the spectacular results so far, I wonder how much more money we will send in with questionable results. All of these dollars are going to inflate our currency. Result? Inflation and earnings (not real earnings) go up.

Will Overall taxes be Higher or Lower

I will give you a hint. We were already looking at a mess when we had social security and medicare with a healthy economy. With the coming economic crisis, taxes will have to go even higher just to keep the leviathon from tumbling. The other part is that next year they will try to lower taxes on middle and lower income people. This might be your chance to put in money at very favorable rates before the spike.

Do you have extra money to put in

This is all up to you. I would just recommend having a nice nest egg in case things get even worse. We thought things wouldn’t get worse a couple weeks ago. Good old Cramer called the bottom of the market at 11,500. Looks live we have slipped a bit since then. It can always get worse, but if you are prepared, it isn’t all that bad.

Good luck, and take another serious look at the traditional IRA. Due to shifts, it could be right for you.


2 Responses to “Traditional IRA’s looking better and better.”

  1. 1 Teryn November 10, 2008 at 12:00 pm

    Argh! This stuff always makes me stressed out. I know I should be investing but that fear of the future always holds me back. We are a little old fashioned I guess. At least I finally got Jason to take our savings out of the safe to put it into something with at least a little bit of interest.

    I’m lovin’ the blog. Jason isn’t too good at keeping me in the loop so I’ve been trying to follow up with people on this great and marvelous internet thingy.

    Where are you guys these days? Any chance we might be able to track you down when we head home for Christmas? I’m heading out mid December, Jason is following later. Yuck- airlines!!! Can’t someone finally invent that Star Trek “beam me up” contraption?

  2. 2 durch November 10, 2008 at 10:54 pm

    We hope to be in the area when you come out, barring any unforeseen circumstances. You have probably been doing better being out of the market and investing in Jason’s brain. But long term, stocks are great, as long as you can ride out the ups and the downs.

    Hope things are going well for you. We are on the Idaho Wyoming border, but will probably be moving soon, hopefully to Idaho Falls.
    Look forward to seeing you

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