Risky Roths

The Roth IRA is a riskier investment vehicle than commonly perceived. Here are a few reasons:

  • If Congress shifts any of the current income tax burden to some other tax, that could destroy Roth IRA’s benefits. A partial shift to a different kind of tax could reduce future income taxes, penalizing Roth IRA holders who contribute post-current-tax-rate income. Such a shift is not inconceivable. For example, shifting current income tax burdens to gasoline taxes (to reduce the demand for gas, theoretically increasing independence from Middle East oil or reducing CO2 emissions) has been discussed and could easily become a reality some day. (I am not advocating this; just pointing it out.)
  • Some predict that income taxes will rise in the future because Social Security and Medicare costs are going up, up, and away. Payroll taxes, not income taxes, fund these programs. It is possible that Congress could fund future shortfalls through increased income taxes. It is just as possible for Congress to simply increase payroll taxes. Roth IRAs give no advantage against increased payroll taxes because payroll taxes are not paid on retirement fund distributions.
  • Taxes saved now via contributions to traditional IRAs, 401(k)s, or 403(b)s are saved at one’s current marginal rate. Assuming one draws a substantial portion of retirement funds from Roth IRAs, taxes saved in the future via a Roth are saved at a rate closer to an average rate. One’s average tax rate is always lower than one’s marginal rate.
  • One’s post-retirement income is usually a step or two lower than one’s pre-retirement income. That pushes one’s future average tax even lower than one’s current marginal rate.

I could go on.

What it boils down to is with the Roth IRA, you are betting heavily on specific political outcomes (total unknowns!), and you are trading a well-defined current benefit (immediate deductibility) for an unknown future benefit. That sure seems risky, especially if your retirement date is 40 years away. I am aware of the side benefits of Roth IRAs (no mandatory distribution, can withdraw contributions at any time, etc.), but risk has a cost. Given the potential risk it sure seems like the Roth is an expensive way to get these benefits.

This is a Dallas Summer?

It has rained so much in the past month that we’re enjoying Houston-like conditions: high humidity, highs in the mid- to upper 80s and the lows are around 70, and swarms of bugs and mosquitoes everywhere. This is nuts! Are we really in Dallas? Where’s the 110 degree summers?

Jennifer fertilized the yard this afternoon, and I didn’t bother watering afterward because I’m sure we’ll get rain within the next 24 hours.

Aftermath of Netsky

I downloaded and ran Symantec’s Netsky removal tool and found that Netsky had left droppings all over my system. After about 30 minutes, it found and deleted a few hundred files, almost all of which were creatively named EXE files waiting to re-infect my system should I accidentally click on them. (Well, technically, the McAfee on-access scanner deleted the file just as the removal tool “touched” them. McAfee’s tool found hundreds of droppings, but it missed three .tmp files that Symantec’s tool actually deleted.)

Now my computer is returned to its normally demented state: .


My son was baptized today at First United Methodist Church of Dallas, our home church. It was surreal to know that this is my own kid, not someone else’s kid. My wife and I were at the front of the sanctuary, and we were the ones answering the questions this time! The questions were simple, but the gravitas was mind boggling.

About 21 family members, including us, were present. Our minister did his annual “state of the church” sermon today, describing how things are going with the church and emphasizing the importance of membership. I am glad our family got to hear that sermon.

First Ever Computer Virus

I have regularly worked with Windows computers since 1990 when my family was given an IBM PC Model 5150. I had never gotten a virus, ever, until last night.

I got this email with a ZIP file. I knew it was a virus, but I opened the ZIP file anyway. (Simply opening the ZIP file typically will not give you a virus; you have to open a file in the ZIP to get it.) Inside the ZIP was one file that appeared to be named something.txt. Before I double-clicked on it I should have immediately noticed all the space after the .txt in the filename. It turns out that the file was named something.txt___________________________.pif (where _ is a space). There were so many spaces that you can’t see the .pif on the end unless you went to Details view.

By doing that I got the W32/Netsky.p@MM and W32/Netsky.ad@MM virus.

I didn’t realize I had a virus until my wife checked her email. She got a message from a friend with a virus payload. Knowing how those viruses work, I immediately checked the headers and did a nslookup on the originating IP (as reported by our ISP’s SMTP server). It was a SWBell.net DSL IP address! I logged in my router and found that it’s my DSL address!

My Windows XP box is fully patched with all latest Windows Updates and Office Updates. The one thing I was lacking was the virus software. I had to redo my computer due to a hardware failure about two weeks ago, and I neglected to reinstall my virus scanner. It’s on now, and it caught the virus very quickly.

I hate the way virus scanners slow down your system, but now I definitely see why they are a necessary evil.