It's time to convert retirement savings from an IRA to a Roth IRA model. Collect the estimated $5.8 trillion of deferred taxes now and apply this to resolving the Social Security and Medicare shortfalls.
If we wait, expect as much as half of that money to disappear. The Treasury and Congress can simplify rollovers from mediocre investment choices to brokerage accounts, and simplify conversions to Roth IRAs. This way, the government could collect trillions in deferred taxes before the money is lost to a bear market.
The rollover and conversion choices should be voluntary, and premature withdrawals should be discouraged. Investors would be wise to remember that the reason they lost money in the last bear market was the rigid buy-and-hold investment strategies forced on them by traditional advice.
Congress could provide incentives to simplify the process by spreading the taxes over a three to five-year period, capping the income-tax rate for Roth IRA conversions, and removing the current income and age tests to qualify. Savers should look before they leap, of course, but they should be allowed to "leap."
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