Remember, the only choice is optimism, the pessimists never get it right.

There is a difference between a promise and a legal contract. If a promise is broken, other than the promiser’s reputation, not much can be done. If a legally enforceable contract is broken, there are remedies that can be exercised.

The news of the week was that billionaire Peter Thiel made what is called a backdoor contribution to a Roth IRA. With that contribution he purchased several investments including Pay Pal shares @ a penny. Pay Pal later went public and, hence, Peter Thiel’s Roth IRA is now worth $5 billion. That’s billion, with a B.

The resulting cacophony of voices from politicians was as predictable as the sun appearing on the eastern horizon in the morning and disappearing on the western horizon in the evening. Please keep in mind that most, if not all, the aforementioned voices have never signed the front of a paycheck.

So, getting back to a promise and a contract, the Roth IRA exists at the whims of the federal government. Can they change the rules at any time? Of course they can and they do. Go back to Social Security. That contribution we all make with every paycheck is paid with after-tax dollars. Almost all of us that file federal tax returns realize, that with just modest amounts of income, some or all of our social security benefits are taxed as income. Haven’t we already paid tax on that benefit?

So it is with the Roth IRA. I have said for a very long time that, sooner or later, congress will change the rules for the Roth because the foundation for the Roth is in the tax code. Just like social security, when the money gets tight, who knows what might happen? There is an answer. One that is not dependent on any one particular product but a properly constructed overall financial strategy.

Ronald Bailey’ and Marian Tupy’s book, “Ten Global Trends Every Smart Person Should Know” documents how the world is getting healthier, wealthier, longer-lived, less violent and cleaner. The authors have prepared a short video, (169) Ten Global Trends Every Smart Person Should Know – YouTube I thought you might enjoy. Couple of surprises!

As always, should you have any questions or wish to meet with or talk with me, please don’t hesitate to email, or call.

Doug Alden

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PS: This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

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