The Roth IRA concept was passed into law in 1997. It may be more pertinent than ever before. You see, once dollars are placed in a Roth, all the growth is free of tax when withdrawn, as long as the account is five years old and you are older than 59 ½.

Traditional retirement savings provide a tax advantage up front: contributions are not subject to income tax. Later on, withdrawals are taxed. The conventional wisdom was that tax brackets could be lower in the retirement years, so the tax later might not be too bad.

The way things look today, we may never see lower brackets than we have today. There are reasons to think that income taxes will be rising:

• The federal income tax changes passed in 2017 were temporary, with the old higher rates coming back after five years.

• Sooner or later the government may need more revenue to deal with record budget deficits and record national debt.

So the old conventional wisdom about lower tax brackets later may no longer apply. The Roth route may be the way to go.

What does this mean?

• Anybody with earned income may contribute to a Roth IRA, even past age 70, subject to a maximum income limit.

• Some employer plans (401k, 403b etc.) have Roth-type options that many employees could change to.

• Young adults with gifted UTMA accounts or other investments could use those funds to start Roth IRA’s.

• Parents or grandparents looking to give the next generation a boost could fund Roth IRA’s for any who have earned income.

• Anybody with IRA balances may convert any amount they choose to Roth, regardless of income. The converted amounts are subject to income tax, but ever after, the Roth benefits are in place.

The tax implications of a Roth conversion can be complicated. You should seek advice from a professional tax consultant. Your own situation and views should rule any decisions you make. Since we cannot know the future, there is no way to know which path is best. Like so many things in life, we will do the best with what we know.

Clients, if you would like to talk about this or anything else, please write or call.