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URL:  http://boards.fool.com/which-is-best-first-the-roth-while-were-20818895.aspx

Subject:  Re: Confused Newbie Date:  5/26/2004  11:24 AM
Author:  agg97 Number:  41096 of 75383

Which is best first? The Roth while we're eligible, or the traditional?

I would definitely put the $$$ in a Roth, especially since you may not be eligible for it in the near future. There's a couple of reasons why:

1. You pay taxes on your contributions now (at your current tax rate) rather than at a future (higher, most likely) tax rate later on.

2. You can take out your contributions from a Roth IRA penalty-free at any time. I'm of the opinion that the more flexible the money is, the more powerful it is.

3. "Tax Diversification" purposes. While the Roth IRA looks like a great deal now, Congress can change that in a heartbeat. Since you'll be forced to start contributing to a Traditional IRA in the foreseeable future, I would want some investments which are still tax-advantaged, but advantaged in a different way. So, you are less susceptible to changes Congress decides to make.

4. You can put more "after-tax" money in a Roth than you can in a Traditional. In effect, you're saving more of your income, because you divide your $3,000 contribution by your after-tax income rather than your gross income. So, while it's still $3,000 either way, with a Roth, all of the $3,000 is YOUR money. In a Traditional IRA, you're in effect investing for both yourself and Uncle Sam. The better you do, the better he does.

So, in summary. Go with a Roth. That what I'm doing.

-Agg97
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