IRA expert Ed Slott sees retirement savings tax bomb ticking louder than ever

investmentnews.com:

As of June 6, 2024, the total debt of the U.S. government was $34.67 trillion, up from $32 trillion only a year ago. In fact, the federal government spent $658 billion on net interest costs on the national debt in 2023, or about 2.4% of GDP. This was the largest amount ever spent on interest in the budget, reflecting a 38% increase from 2022.

All this borrowing by Uncle Sam eventually needs to be paid for. And that means higher taxes ahead – or look out below, says IRA expert Ed Slott, author of the newly released The Retirement Savings Time Bomb Ticks Louder.

“It’s a ticking time bomb,” said Slott. “It’s the tax in your IRAs and 401Ks. That money has not yet been taxed. It’s tax deferred, not tax free. And with taxes probably going up very soon, a lot of that could be lost when you need the money the most in retirement.”

Slott’s latest book is the sequel to his 2021 bestseller The New Retirement Savings Time Bomb, which helped readers take control of their financial lives by avoiding unnecessary taxes, primarily in their retirement accounts. Slott felt the need to update that book after Congress made a number of changes in the retirement space in the Secure 2.0 Act, even as it continued to dig a deeper hole in terms of its debt obligations.

In Slott’s view, those taxes on retirement savings accounts are going to have to be paid eventually, so savers should pay them now while tax rates are still at all-time lows. That means opening up – or converting to – a Roth IRA, which will allow savers to contribute after-tax dollars and withdraw them tax-free and penalty-free after the age of 59 and a half.

“Roth IRAs offer more opportunities,” said Slott. “You have the Roth 401Ks, you have even 529 to Roth, Roth Sep, Roth Simple,