Roth IRAs

 Over the years, I've developed a number of passions.  Most are like tilting at windmills and I think of them as "Quixotic".  Unlikely to ever bring about real change.  At least due to my personal efforts.

I was a very early fan of Ayn Rand and I credit her with shaping my views on economics and government.  Sports car racing was a passion for a long while, maybe 10-15 years.  Somewhere along in that period, I became aware of the damage done by tobacco and the idiocy of tobacco use.  That anti-smoking passion is ongoing.  http://austinfarm.us/homegrown/smoking.html

After a semi-satisfying career with a defense contractor, I developed a passion for truck farming.  An economic disaster but otherwise VERY satisfying.  After viewing Who Killed the Electric Car, about 2005, I developed a passion for EVs.  Note that 2005 was well after the events chronicled in the documentary; during the events I had zero interest.  Which I regret.   EVs and truck farming overlapped quite a bit but I eventually faded out of truck farming.  Then, came my passion for solar energy production and sales.  That is ongoing.  

I've posted this in other places but it is impossible to give it too much emphasis:

https://en.wikipedia.org/wiki/Patent_encumbrance_of_large_automotive_NiMH_batteries

The conclusion that major automakers, and especially GM, set back the progression to EVs by 10 years is inescapable.

OH! Another old passion: Travel in Mexico.  In the 1960s and 1970s, I/we would make at least one extended trip in Mexico per year.  Sometimes more.  All over.  Going to the Pacific coast in the winter was especially gratifying.  There are many 1970s Mexico photos  here: 

 http://austinfarm.us/homegrown/downloads/slides/all/index.html

Especially with the installation of many SuperChargers in Mexico, I wish Mexican travel were safer than it has been in recent decades.   I'll have to get Canada and Alaska more thoroughly explored before I return to Mexico.

But, on to the topic.  Before my wife died in 2012, we both had become aware of the value of Roth IRAs above Traditional IRAs.  But, our contributions were modest though we both contributed the maximum allowed to Traditional IRAs. Since her death, I have applied myself to converting from Traditional to Roth.  A rather painful process since tax must be paid on the conversions.  Over the years, I've become more and more convinced of the value as I made fortuitous investments in my Roth and "it grew like Topsy".   All the while, taxable investments and income became more and more onerous. 

The "Quixotic" aspects:  I don't believe I have ever influenced a smoker to become a non smoker.  That is despite cash incentives.  I've long advocated adoption of EVs.  Even though that adoption now seems a certainty, I don't feel that I have had a measurable effect.  I believe I have never convinced anyone that it is possible to cost effectively sell electric energy. It is the same with Roth IRAs.  I tout their value but fail to sway anyone I try to influence.

In discussions with friends about Roth's I get quite a few what I consider idiotic arguments.  "I would lose my favorable long term capital gains treatment".  "I would not be able to offset gains with losses".  "Losses would no longer be deductible".   EVEN "I WANT to pay tax.  The government has to get revenue somewhere.  The government knows better than I how money should be spent".

For those not familiar with Roth IRAs: Roth contributions are made with taxed dollars so there is no immediate tax benefit.   OTOH, Traditional IRA contributions reduce reportable income and therefore reduce the current tax bill.  BUT all Traditional IRA money is eventually taxed, including the growth.  The big advantage of Roth IRAs is that growth completely escapes taxation.  You pay tax going into a Roth but never pay any tax on any withdrawal.  With Traditional, all withdrawals are fully taxed.  Eventually, account owners are forced to make withdrawals which triggers tax payment.  With a Roth, account owners are never forced to make withdrawals and any withdrawals are never taxed.

One of the arguments for using Traditionals is that the taxing may be shifted from a life stage of high income tax rates to a stage of lower income tax rates.  Many times, just the opposite is true.  The BIG deterrent to converting existing Traditionals to Roths is the tax bill that is generated on the amount of the conversions; many refuse to take on the short term tax burden.  Thereby prolonging the tax pain.