I had lunch the other day with a couple of bankers. It was a lively discussion and one of the topics was the benefits of investing in a traditional IRA or a 401K plan verses a Roth IRA or just non qualified savings.
We were discussing the current and future tax rates. Most people believe that when they retire the their tax rate goes down because they need less money to live. Typically the tax rates remain about the same. Typically their current spending the day before retirement is going to be pretty much the same the first day of retirement.
So, if the spending is the same; the money to spend will probably be coming from qualified savings (IRA or 401K) in retirement. So this is taxed as ordinary income; so from the governments perspective there is no change from the prior tax rates.
Also if you start that traveling that you had been putting off your whole life the money you need is greater and so your tax rate may being going up.
All this is before Congress gets into the act. Do any of us think that our taxes are going down in a significant way any time soon? I expect that they will start to increase in the not too distant future as we can pay off the wild spending that the government has been spending for the last several decades.
So with the tax rate the same at retirement does it make sense to put off paying taxes from the current rate to an unknown future rate? That is a question that can only be answered on an individual by individual basis based upon their risk tolerance.