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Financial Planning / Tax Strategies


Subject:  Roth versus Traditional IRA Date:  1/31/1998  2:36 PM
Author:  Lemuel Number:  1643 of 123022

To TMFTax:
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. The