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Another Case for Tax Profile Diversification

I wrote about how we’ve been lucky to experience a period of exceptionally low tax rates, likely helping the prosperity we’ve experience because people have more money to spend, in the past when I took a look at the historical top marginal tax rate [3] a few weeks ago. Well, yesterday Pat Regnier did the same in a piece called the Great Tax Hike [4] in which he argues that we’re likely going to see an increase in our taxes as we try to figure out how we’re going to deal with the Social Security shortfall, increased spending on Medicare, servicing the national debt, and a host of other issues. Now, the big twist, which I mentioned in my Devil’s Advocate post against Roth IRAs [5], is that some of these tax hikes could come by way of a consumption tax, an added tax on the things you buy, and so the Roth IRA wouldn’t protect you against that.

So, what does this mean? Since none of us can see the future, we should all diversify your retirement asset tax profile [6] to make sure we aren’t caught going one way or the other.