On December 29, 2020, Financial Advisor magazine published a review of my book Roths For The Rich, written by James G. Blase. While I’ve always appreciated feedback on my books, whether positive or critical, this particular article contains numerous inaccuracies and misrepresentations of my book. The purpose of this direct response to James G. Blase’s review of my book is not to be a comprehensive answer to everything he argues in his article, but to set the record straight on these factual inconsistencies, so as not to cause any confusion about what I actually say and argue for in my book. I will provide direct quotes from Blase’s original review (in italics) and then my response below each one.
“Mr. Duffy argues that investing in Roth IRAs is far superior to investing in taxable IRAs.”
In actuality, I mention that there are circumstances where a traditional IRA would be preferred to a Roth. An example of this would be when someone donates their IRA funds to charity. Blanket financial advice is rarely ideal and each person’s unique, individual circumstances should always guide their financial decisions. This is something I repeat over and over again in my book.
“Throughout the book he compares a 40-year-old couple investing $55,000 each year, until age 65, in a Roth IRA (either directly or indirectly) versus the same couple investing $55,000 each year, until age 65, in a regular IRA.”
This will set the stage and give some context of what my book is talking about and the circumstances around our disagreement. Not to nitpick, but the 40-year-old couple in my book never invest any money. The mathematical examples in my book are of an individual who is 40 years old who invests $55,000 per year. My only fear is that this was missed due to a cursory reading of my book with a goal of writing a critique, in contrast to a careful reading of what I was actually saying.
“Using the main example in this book, this investor obviously has $110,000 of surplus taxable income lying around each year. This is because $55,000 will be invested in the Roth IRA and $55,000 will be paid to the IRS and state taxing authorities, based on the author’s assumption that 50% federal income tax rates are on the near horizon.”
This is flat out in error. And before I describe the misrepresentation of my book, notice how these two sentences actually contradict each other. If a 50% Federal income tax rate is “on the near horizon,” then why does an investor today need $110,000 of surplus taxable income to invest $55,000 in a Roth? They don’t. Further, I clearly state multiple times throughout the book that the couple which serves as the main example in my book have a combined income of $300,000. This means that both today and when my book was written, they are only in the 24% marginal tax bracket. (This means only some of their income is taxed at 24%, other income at 22%, and the rest at lower rates.)
So, I must point out the glaring misrepresentation here, which is multifaceted. First, the investor in my book who is investing $55,000 per year would actually need less than $75,000 of surplus taxable income, not $110,000. A 50% Federal income tax bracket does not currently exist and thus, every example and calculation in my book is run at the highest tax bracket today which is 37%. So Blase’s claim that any example in my book is paying a 50% Federal income tax rate is simply unfounded.
Next, I never state nor imply in my book that “50% Federal income tax rates are on the near horizon.” I have chapter titled “Higher Taxes?” (notice the question mark), where I look at a hypothetical increase in the top tax bracket from 37% to 50%. I never state that this is what I think taxes will be raised to, nor do I say that this rate is “on the near horizon.” My only comment in the book about a tax increase that will happen soon is the sunset provision of the Tax Cuts and Jobs Act, which is scheduled for Dec. 31, 2025. And the tax rates that are scheduled to return do not include a 50% bracket.