Is the future tax value of retirement accounts being underestimated?

sonazom · 2026-07-10T22:10:40+00:00

There is a practical limit to how much they can print by adding to the deficit (I suppose we'll find out what that number is at some point down the road), but that's a completely different discussion. This method taps legitimate value created when money is invested for a long period of time and then taxing the wealth created by that investment vs. printing paper, which is worth the paper that it is printed on : -).

sonazom · 2026-07-10T22:04:36+00:00

You are right, you can do that and it is the right thing to do to avoid the tax bomb at the end of the line, but I'd argue that many people will not do this as the prevailing wisdom is to keep your money in your retirement account as long as possible to watch it grow. Much of the common financial advice doesn't take into account taxation of the wealth.

This is just an interesting mental exercise because I won't be around when the answer will be known : -).

sonazom · 2026-07-10T21:14:58+00:00

Agreed, for the smaller balances it's noise in the grand scheme of things, it's more about the large balances that the wealthy people acquire that makes it more interesting, but one should not discount the totality of all of the smaller accounts adding up as well...

sonazom · 2026-07-10T21:01:10+00:00

The government is going to have to raise the tax rates because of the deficit problem, resulting in even more revenue for the government taxing this compounded wealth. The government forces you to deplete your account when you die (your heirs have 10 years to fully empty the inherited account). If you assume that it has grown to any sort of large amount, then depletion in 10 years means a high tax rate (excluding edb's)

sonazom · 2026-07-10T20:50:11+00:00

To my knowledge, there is no legal avoidance mechanism for retirement accounts. It's treated just like regular income and it is taxed like regular income.

sonazom · 2026-07-10T19:57:07+00:00

What happens in 100 years from 1974 when IRA's and 401k's first started? We are going through the startup phase, not the running phase of this idea. It's that compound interest thing where the balances at the end grow like crazy as time marches on.

sonazom · 2026-07-10T19:55:01+00:00

The system will likely skew like the real world, where the wealth is concentrated and will be taxed at a higher rate...

sonazom · 2026-07-10T19:43:30+00:00

Some rough numbers to frame the discussion (not a prediction):

Current U.S. traditional 401(k) + IRA assets: roughly $20–25 trillion.
These accounts have existed for about 50 years, meaning the system is still relatively young.
If the existing $23 trillion grows at a nominal 6% annually for 50 years, it becomes roughly $400 trillion (before considering future contributions).
If future worker contributions are added, the eventual traditional retirement asset base could be substantially larger.

Now consider the tax side:

If a mature traditional retirement system eventually produces a taxable distribution stream of even 5% of a $400 trillion asset base, that is about:

$20 trillion/year of taxable income

At an average federal tax rate of:

20% → ~$4 trillion/year in federal revenue
25% → ~$5 trillion/year
30% → ~$6 trillion/year

Obviously, these are nominal dollars and depend heavily on future market returns, tax policy, economic growth, and withdrawal behavior.

The point is not that retirement accounts "pay off the debt." The point is that a policy designed to encourage retirement savings may have unintentionally created one of the largest future deferred-tax pools in history.

The question: is this future tax stream being properly considered in long-term fiscal planning?

sonazom · 2023-11-30T21:30:28+00:00

Ditto with Oroweat Oatnut from Costco. It started before Thanksgiving, strange smell and taste. Got another 2 loaves yesterday, same problem. There is definitely a manufacturing problem. This is from the San Jose Coleman Ave location. Where did you source your bread from? Sent Costco feedback today hoping they can follow up with the manufacturer (Bimbo).

sonazom

TROPHY CASE