To Roth or not to Roth?
Wednesday, October 7, 2009 at 08:59AM "From a mathematical standpoint, the decision of which type of IRA is more beneficial for a particular investor is primarily dependent on the investor’s expectation of their [sic] future tax rate relative to their [sic] current tax rate....
Since the future of tax rates is unknown, investors may want to hedge their bets by investing in both traditional and Roth IRAs. This approach, often referred to as “tax diversification”, allows the investor to lock in taxes at current rates on a portion of their portfolio balance, thus alleviating some of the uncertainty about future tax rate changes."
Source: The rules for Roth conversions are changing in 2010, Vanguard, Sept. 2009
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The analysis is, of course, correct, and it is based on a reasonable assumption of significant uncertainty regarding future tax schemes (translation: no one has clue what these crazy SOB's might do).
An irrational, unpredicable tax policy might be helpful to those seeking to monetize the ability to dispense economic favor by way of law or regulation, but it is not a helpful policy for the creation of wealth, either individual or national.
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