The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/the-regular-ira-ultimately-sticks-you-with-a-tax-13263099.aspx

Subject:  Re: Taxes on gains with Roth? Date:  9/7/2000  4:39 PM
Author:  thehendrys Number:  24655 of 75797

the regular IRA ultimately sticks you with a tax bill for those profits (plus your initial contributions). The Roth doesn't

But let me confuse you more. (Something I learned recently)...

The Roth and the Traditional are really exactly the same, no matter how much Gains you have...

Suppose you have $2000 (pre-tax) to invest.

Traditional
Initial = $2000
Balance after 20 years (assuming you double money every 5 years) = $32000
Withdrawal Amount (assuming 28% tax rate) = $23,040

Roth
First, tax man taxes contribution, so
Initial = 28% of $2000 = $1440
Balance after 20 years = $23,040

Pretty neat, eh?

Anyway, the Roth is better is you have the money to contribute $2000 (after-tax). Because both have a maximum of $2000, you can do better with $2000 initially in the Roth than $2000 initially in a Traditional.

Hope that little bit of Trivia was fun for ya.
the hendrys
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us