Look in your savings, checking account, or wallet right now. The money in there is worth more today than it ever will be in the future. The reason is something called inflation, and recently it is getting a lot of press. Going back 30 Years to 1981, the average rate of inflation has been 3.31% per year. This means if you had $1,000 in 1981; it only has the spending power of $364.29 today as it did in 1981.
The next topic is taxes. Today there are record deficits and large unfunded liabilities by both state and federal governments. Our population is aging, and our workforce reduced. Politicians have two choices either they can cut benefits or raise tax revenues. So this begs the question, which direction do you think taxes are headed?
So why does traditional thinking say take as many pre-tax dollars today and defer them for use as far in the future as possible? Think about it, we are taking our most valuable money (today’s dollars); deferring taxes in what most likely will be our lowest tax bracket. So one day in the future we will have less buying power and our money will be taxed the most.
How long do you want to do this?
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