Given government deficits and the likelihood that income tax rates are heading higher, is now a good time to convert to a Roth IRA?
Unless government spending is reduced dramatically, the general consensus has been that taxes can only go higher at the federal, state, and local levels. Of course, there is a limit at which higher taxes would have a negative effect on the economy, defeating the goal of higher revenue collection. If combined income tax rates (federal, state and local) rise too much, economic activity could fall significantly, paradoxically reducing overall tax revenue. Policy aside, whatever happens with respect to future tax rates and spending at the federal, state, and local levels, the best you can do is to create a plan based on what you know now about current tax law and where you expect to be personally with respect to future income. While the future may be impossible to predict with absolute certainty, you likely have a better idea of your future situation than of what the federal or state government might do. Assuming our current system of graduated tax brackets based on personal income levels
