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Subject:  Re: IRA'S Date:  5/24/1999  8:55 PM
Author:  whd23 Number:  10747 of 88785

On your point #1:  I agree completely.  I was just
trying to stay consistent with the original
assumptions.  Using a 20% tax rate for the non-IRA
account would yield the following numbers:

  $1.80 ($2 - Tax: $0.20)
  $2.88 ($3.60 - Tax: $0.72)
  $4.61 ($5.76 - Tax: $1.15)

total: $12.61

Your point #2:  Again, I agree with you.  It also does
not take into account any dividends generated which
would be taxed at your income tax rate.

Furthermore, this example is too simplistic to prove
the point one way or the other.  What you really have
to do is run it through a spreadsheet to see the
effects year-over-year.

The biggest effect that is missing from the Traditional
IRA, and the thing that I think really kills it, is
the fact that for $X amount of income per year, you
must withdraw $X/(1-tax_rate).  With a Roth IRA, you
would only withdraw $X amount.  This means that your
Traditional IRA gets depleted much faster then the
Roth with hurts its overall return.


P.S.  I have a Excel spreadsheet that I wrote that
I would be glad to share with other Fools.  It
would be nice to have someone else review the work.

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