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URL:  http://boards.fool.com/kat-ltlt-now-you-obviously-dont-receive-this-10141346.aspx

Subject:  Re: Honest IRA/Roth Comparisons Date:  3/30/1998  10:56 AM
Author:  TMFPixy Number:  2501 of 75880

KAT,

<< Now you obviously don't receive this benefit if you only put $1,440 in your Roth IRA. But if you want to do a thorough and honest comparison, try this: compare the result of putting $2,000 per year in a Roth IRA with the result of putting (a) $2,000 per year in a deductible IRA and (b) $560 per year in a taxable (non-IRA) investment account. I think Top Cat makes a good point when he says people generally don't shoot that $560 of tax benefit into savings, but my point is that the Roth comes out way ahead over the long run even if they do.

The Roth IRA is BIGGER. That's what makes it so powerful. That doesn't mean it's for everyone, and I'm careful to point out reasons NOT to use a Roth IRA on my web site. But if you think the best way to compare the Roth IRA with a deductible IRA is to shrink the Roth down to $1,440, then you truly are missing the boat. The extra $560 is the engine that pulls the Roth IRA out ahead.>>

Having run and published those numbers myself (see http://boards.fool.com/Registered/Message.asp?id=1040013000441002&sort=postdate ), I can agree with caveats. All other things being equal, if the marginal rate drops to 15% at the time of withdrawal, the traditional IRA in conjunction with the $560-investment account beats the Roth for the first ten years. After that, the Roth is superior.

Regards……Pixy


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