One of the greatest concerns many Americans have about Roth IRAs is whether a change in the tax code can end up screwing us. Right now, you are taxed on contributions made into a Roth IRA but you are not taxed when you take distributions. This is different than the Traditional IRA where you get tax-deductible contributions but are then taxed when you begin taking distributions. There are plenty of other differences but that’s the biggest one when it comes to the two.
So, can Uncle Sam, in a pinch, decide to double tax Roth IRAs? Of course they can. If we moved to a Fair Tax/consumption tax where income tax is removed and we are taxed on what we spend, that’s essentially a double tax on the Roth IRA. The government could also lower tax rates, increase tax rates, or change the game completely (in the case of a consumption based tax).
The key is to diversify your tax profile so that you hedge your bets. Contribute to a 401(k) or 403(b) as well as a Roth IRA. You get tax benefits today as well as tax benefits in retirement.
Don’t put your eggs all in one basket! (unless it’s my basket!)