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Subject:  Re: Roth Beware-Substantial Savings Date:  1/14/1998  12:28 PM
Author:  rickisme Number:  1298 of 88786

Orangeblood wrote: "Did you assume the $560 would compound tax-free? If so, why?"

Very good question Orangeblood. Even though the $560 is the savings each year on income already taxed that one would get from contributing $2,000 each year, that money cannot be placed in the IRA tax free because $2,000 is the maximum per year contribution. So, assuming one could not either increase the amount of say a 401K contribution by $560, or if one could not invest the $560 in a nontaxable municipal that would yield 12% (not likely possibly), then yes, the $560 would be taxed at 28%. In my example, I did not consider ALL (probably should have) of the possible ramifications of what might happen, it was presented as a simple (not possible with taxes) example (in rough draft stage of completion) of one possible difference between Roth and Regular IRA. Thanks for your astute question.

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