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.

“Assuming the 50% income tax rate which the author feels is coming by the year 2026 (if not earlier, after the election)…”

Once again, this is a blatant misrepresentation of me and my book. I never said that I feel any specific tax rate is coming by 2026, or any year for that matter. As stated previously, my concern is that it appears my book was hastily read through with the goal of having an ax to grind.

“Assuming the 50% income tax rate which the author feels is coming by the year 2026 (if not earlier, after the election), in the regular IRA example the clients would have another $27,500 to invest each year, outside of their regular IRA, as the tax savings generated by the $55,000 tax deduction.”

All of the calculations that Blase did for his review are based on a 50% Federal income tax on 100% of the invested dollars. As previously discussed, this is not the reality of the current tax landscape in this country, nor is it an accurate representation of my book. I have one short chapter (just 8 pages), where I calculate hypothetical future higher taxes “to see for myself” what the numbers look like. Blase then uses this hypothetical example as a basis for all of his calculations in his review. This is known as comparing apples and oranges and is also a straw man argument.

The examples in my book and the main calculations throughout my book all use real tax rates which exist today. And the overall theme of my book is that you should pay taxes when they are low and defer taxes when they are high. And since the Tax Cuts and Jobs Act of 2017 reduced tax brackets to the lowest rates in decades, we have an unprecedented window of opportunity to take advantage of historically low rates. Reading this critical review of my book without any knowledge of the content of my book itself, you would walk away thinking that my book is arguing to invest with Roth when taxes go up to 50% or higher. Nothing could be further from the truth.

“Now let's go back and add in the forgotten portion of the author's analysis described in the first section of this book review, i.e., the additional $27,500 in funds the couple will have available to invest each year under the regular IRA investment plan, beginning at age 40 and continuing through age 65 (i.e., on account of their not having to pay the Internal Revenue Service the full $55,000 in income taxes each year on a $55,000 Roth investment, assuming the same 50% marginal income tax rate the author assumes).”

It's discouraging to hear Blase refer to a portion of my analysis as “forgotten” when I have an entire chapter dedicated to this exact thing. (It’s called Higher Effective Contributions.) Even more, I discuss in this chapter that I did calculate what would happen if the investor who is getting a tax deduction on their tax-deferred account was investing the tax savings. And the result was that due to today’s historically low tax brackets, the Roth accounts still come out ahead. And so once again we have a straw man Blase has created, which is then very easy for him to tear apart. And that straw man is that I have “forgotten” about an extra $27,500 the couple in my book could invest if they get a tax deduction. Again, there is no 50% Federal income tax rate today and the married couple in my book is/was in the 24% marginal tax bracket based on a joint income of $300,000.

Summary
At the very beginning of my book (page 10), I warn that my book may have a very short shelf life. And the reason for this is that if taxes go up, Roth may not make mathematical sense anymore. The overarching principle I attempt to communicate in my book is that paying tax now and investing in a Roth would be a wise decision if taxes end up higher in the future when you are taking distributions. Instead of making this clear, Blase implies that my book is arguing for something else entirely, which is the use of Roth once taxes go up. And this is the direct opposite of my actual message, which can be summed up in this simple phrase concerning taxes from Chapter 4 of my book: “Pay Low and Defer High.”

When making a public statement about someone’s work, whether it’s praise or criticism, I strongly believe every effort should be made to give an accurate representation of what is being praised or criticized. Unfortunately, that was not done here. I hope this response will help clarify what I actually write in my book and clear up any potential misunderstanding created by James G. Blase’s review.

Will Duffy is the author of Roths For The Rich: How to Fund Your Roth With Over $100,000 Each Year.