The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Roth versus Traditional IRA||Date: 1/31/1998 2:36 PM|
|Author: Lemuel||Number: 1643 of 124139|
In your recent article discussing the option of Roth or Traditional IRA, you concluded by saying that the fictional Sarah should probably choose the Roth IRA. I was confused by this.
In advising my parents about the Roth IRA, I discovered that basically the Roth comes down to a simple property of multiplication, the associative property.
The basic future value formula for an investment is as follows:
([Principal]*(1+[Interest Rate])^[Number of Periods])
The Roth IRA takes its tax rate at the beginning, multiplying by the principal