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Subject:  Re: Roth VS Traditional Date:  7/8/2004  12:55 PM
Author:  Fuskie Number:  41511 of 88823

I'm planning on re-starting my contributions to an IRA this year. I missed the deadline for my company's 401K, so this seems the best route for me for now.

This is the second time I have heard this. Usually, enrollment in a 401k is any time after a 30 window when you start employment. This idea of a deadline for 401k contributions is confusing to me.

I'm curious, though, about which type to open. At my age and income, I think most financial advisors would recommend a Roth, since I'm still (relatively) young and my income will be more in the future than at present. However, a former IRS employee and friend of the family made a comment that I keep dwelling on. She said that she always recommends that people go for the Traditional, because it will be some time before I can retire, and by then the tax laws may have changed. (She cites the fact that CC interest used to be tax deductible as well-plus other examples I can't remember right now, and that the urge to tax any and every income seems to be on the rise.) She thinks it's always better to take the tax break you know you will get right now over the one you may get in the future. This is somewhat like the risk you take whenever you invest anywhere, but I must admit she has a point.

The question is not whether you will making more later in your employed life but what your income will be in your retirement. If your retirement income will be more than today, then you would have less tax liability on that money today. But I don't really pay attention to that. I like the Roth because you can invest in dividend growth stocks and funds and never pay taxes on the income. It is the tax savings on the gains that makes the Roth worthwhile. Eat the contribution tax now and have no liability on retirement.

Who has contributed to a Roth every year except last year...
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