Jan
17
Better to invest in traditional IRAs, with pretax $s, which can grow faster BUT you have to pay taxes on down the line, or better to do Roth with post tax $s and not have to pay taxes when retired? Or do a little of both ?
Roth IRA, Traditional IRA, 401K
IRA Questions and Answers
3 comments so far...
the future is a very uncertain thing. both might be right and possibly neither might be right. The big question is what will the future tax rate be. The government refuses to not spend money and also not to pay its bills. What is going to happen when they can not longer borrow all the money they want to spend? Taxes in the future will have to rise. And there is also the possibility that the income tax might be replaced with an ad valorum tax. Any of these will change the current assumptions under which ira are currently peddled.
If you have no retirement savings, go for the traditional IRA/401k and get the money going.
As you get closer and closer to retirement, realize that when you start taking the money out, you may have enough saved that you will owe 15% or more in tax. If so, any year that you are in a lower tax bracket is a year to roll some money from the IRA to a ROTH and pay taxes on it….
pretax is better – you save more in taxes now that you would in the inflation affected future and it’s not going to affect your social security payments by more than a couple of dollars a month
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