Your Roth Won’t Be Tax-Free If You Break These Rules

**Robert Brokamp** (0:02)
Rules that make your Roth tax free, and the social security time bomb ticks louder. You're listening to the Saturday Personal Finance edition of the Motley Fool Hidden Gems Investing podcast.
I'm Robert Brokamp, and for this week's main segment, I outline the sometimes complex rules you must follow to ensure that distributions from your Roth accounts are tax-free. But first up, let's turn to some news from this past week, starting with the release of the latest Social Security Trustees Report on Tuesday. And well, folks, the news isn't good. The Social Security Retirement Trust Fund is now projected to run dry in late 2032, one quarter earlier than last year's estimate, and a full year ahead of where projections stood just a couple of years ago. The primary culprits behind the accelerated timeline are lower birth rates, reduced immigration, and the revenue impact of the One Big Beautiful Bill passed last summer, which reduced how much Social Security benefits are taxed. When recipients pay taxes on benefits, that money goes back into the Trust Fund. But now fewer beneficiaries are actually paying taxes on benefits, which is good for them, but not for the program's financial health. When the Trust Fund is depleted, the program will only be able to pay about 78 percent of scheduled retirement benefits from incoming payroll tax revenue. So the program isn't bankrupt, as some people might suggest, but that is still a significant reduction in benefits. Meanwhile, Medicare's Hospital Insurance Trust Fund is also now projected to be depleted a quarter earlier in 2033 So stress test your retirement plan and make sure it'll still be okay if Social Security gets a 20 to 25 percent haircut. Also, keep in mind that this is an election year, and any US senators elected this cycle will probably have a say in how Social Security gets fixed. The solution will probably be a combination of higher taxes, benefit cuts and gradually increasing eligibility ages, either for everyone or just for higher income Americans. So you might want to make sure where the candidates stand on this issue before casting your vote.
For our next newsy item, we turn to an article from the Wall Street Journal, Sharon Turlip with the headline, Americans are keeping their cars longer than ever and remaking the auto industry. According to the article, the average vehicle on US roads is now approximately 13 years old, a historic high and a 10 percent increase from a decade ago. While the trend toward older vehicles has been holding for 15 years, it has accelerated sharply in recent years as new car prices have climbed to an average of roughly $50,000, up about $10,000 from the start of the decade. High interest rates compound the sticker shock and economic uncertainty is pushing even drivers who could theoretically afford a new car to hold off. Drivers are also keeping their cars longer because they're still in good shape. Advances in engineering, materials and safety technology mean that today's cars genuinely last longer, so keeping an older vehicle running is a more viable strategy than it once was. Automakers and dealers, long focused exclusively on new car sales, are now pivoting toward the service and repair business. Ford, for example, is now running an ad campaign not to sell new cars, but to persuade existing owners to bring their vehicles into dealerships for maintenance. Service and repair now accounts for roughly half of the average dealership's gross profit, making it far more lucrative than selling cars. I'll just add that keeping your car running for another year or few could be a significant boost to your bottom line. Yes, you may pay more in repairs, but according to Experian, as of the end of 2025, the average monthly payment was $767 for a new car and $537 for a used car. So unless you're shelling out $6,000, $9,000 a year in maintenance, you'll come out ahead by sticking with your current vehicle.
And now for the number of the week, which is 12%.
That is how much growth in investment prices has inflated the earnings of companies in the S&P 500 According to Bao Lian Wang, a finance professor at the University of Florida. As Dr. Wang wrote in his sub stack, the S&P 500 posted annualized earnings growth of 28% in Q1, 2026, well above the five-year historical average of 16%.
But beneath that number lies a significant structural distortion. A substantial portion of that reported growth didn't come from actual business operations. Instead, it flowed from an accounting standard that requires companies to benchmark the fair value of their equity investments to market every quarter, routing any unrealized gains, including paper profits from private startup up-arounds, directly through the income statement under the other income and expenses line. The practical effect here is two-fold. First, investors and analysts who benchmark valuations against gap earnings may be drawing conclusions from figures that are partly illusory and unlikely to recur. Second, the same accounting rules work in reverse. A down-round in the private venture market or a broader pullback in investment prices could translate directly into reported losses, even if the underlying businesses remain healthy.