Re: Traditional vs. Roth IRA

From: nowak@comm.mot.com (Mark Nowak)
Subject: Re: Traditional vs. Roth IRA
Date: Fri, 15 May 1998 16:44:50 -0500

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>Date: Thu, 14 May 1998 17:06:35 -0400
>From: PowellFamily <PowellFamily@tri-countynet.net>
>Subject: Traditional vs. Roth IRA
>
>According to all the information sent to me, the only time a Roth IRA is
>to your advantage is if you think your tax bracket will be the same or
>higher when you retire.  

Not true.  If you make enough such that you can't deduct deposits
into traditonal IRAs, you pay taxes on those deposits (which you first
earned).  Therefore, in this case for either a traditional IRA or a Roth
you end up paying taxes up front in the same tax bracket.

>Personally, I am planning for a lower tax
>bracket.  At that time my house will be paid for, my children will no
>longer be living with us, and I have built up most of my necessities
>already.
>
>I want to use the rest to LIVE along the way.  I want to enjoy nice
>vacations with my children.
>
>Do I think it would be advisable to change over a traditional to a Roth
>IRA so you can pay taxes today instead of defer them which is what made
>sense of an IRA to begin with?  No Way!

In the case I mention you not only defer taxes you eliminate any
future taxes while still paying the ones you'd have to in either type
of IRA.

>Sherri

Personally, I hope to be earning more from my investments by the time I
retire than even my salary just prior to my retirement will provide, so
my tax bracket may (hopefully WILL be higher) when I retire.  It's
a dream I know, but mathematically it is possible.

For example, if inflation stays at 2 or 3% and you invest $1 at a 6%
rate, at some point in the future (maybe very far in the future), you
will be making lots of money without even working.

If you make enough such that you can save and invest aggressively
while not cutting out things you enjoy, the Roth ends up being
the best deal by far.

Mark

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