Quote:
Originally posted by MysticLlama
So you don't pay the taxes on the withdrawals like you do with a Roth, which makes it tax deferred, as well as free.
That's the part that makes me wonder how long these can possibly go without getting tax laws changed on them.
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I'm not sure what you're looking at, but the IRS normally considers transactions made
solely for the purpose of avoiding paying taxes to be illegal tax shelters. (Yesterday's or Tuesday's Wall Street Journal had a good article about "myCFO" and how it was just a tax shelter.)
Additionally, with a Roth you do
not pay taxes on your withdrawals. If you quality to contribute to a Roth, you put in dollars you have already paid the taxes on, let it grow tax-free, and withdraw during your retirement without paying any taxes. Additionally, you can take the dollars you have contributed out without any taxes or penalties prior to your retirement if you choose.