The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/kilmarnoch-interesting-analysis-you-are-10096161.aspx

Subject:  Re: Roth IRA Contriubtions & Conversions Date:  2/2/1998  2:56 PM
Author:  TMFPixy Number:  1579 of 80374

Kilmarnoch,

Interesting analysis. You are obviously an advocate of effective tax rates, but you missed a very key point that negates totally your comments about my use of marginal tax rates. Remember, I said:

<< John makes a tax-deductible contribution of $2,000 per year to a traditional IRA. He is considering the new Roth IRA, but must maintain the same net income he has today using the traditional IRA. John is in the 28% marginal tax bracket, which means he may only contribute $1,440 to a Roth IRA to keep his net income the same as it is by using the traditional IRA.>>

In your argument for using effective rates, you said:

<< John makes $40k per year, so his effective tax rate is 19.99%....if he put 2000 into a traditional IRA he would get $399.78