Pay Now or Pay Later? (Video)

A big question amongst investors is whether it’s a good idea to pay your taxes in advance as you do with a Roth IRA or defer them as you do with a traditional IRA. Traditionally, the advice has been to defer taxes as you are expected to be in a lower tax bracket after retirement than while you are working.

With our federal deficits reaching astronomical levels, many experts are expecting tax rates to double in the next 10-15 years out of financial necessity. The highest historical tax rate was 94% and the historical average is 70%. Current tax rates are at near-historic lows and it’s all but inevitable that they are going to rise substantially.

In this video, I explain the advantage of paying your taxes now rather than deferring them into the future. While in the video I describe making a $100,000 contribution to an IRA, which of course is way above the annual limits, the example would work perfectly for a rollover.