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Author: agg97 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75880  
Subject: Re: Confused Newbie Date: 5/27/2004 1:22 AM
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Bob and Greg,

Great rebuttals. You both got a rec from me. A couple things, though.

3. Many think that the longer you can postpone taxes on money the better. The validity of this argument depends to a great extent what current and future tax rates are.

IMHO, this isn't a strong argument. That applies more to selling individual stocks and how much capital gains you want to realize. When the amount of YOUR money is affected (such as $3,000 after taxes in a Roth IRA versus $2,250 after taxes assuming you're in the 25% marginal tax bracket in a traditional IRA)

4. Another view of Agg97's fourth point is that Uncle Sam is letting you use their money to invest from now until retirement.

True, but not a strong argument for the same reason as above. To make this an even comparison, you'd have to invest the remaining after-tax amount to make it equivalent to the Roth. Then you're limited to investments which aren't hammered by taxes on an annual basis, which limits your choices. Limiting choices is a good way to decrease returns on investments.

3) I agree that money in a Roth IRA is much better than then same amount in a traditional IRA but if I read you post correctly you can't currently afford to max out the IRA's. So the choice is more like either $3000 in a Roth or approximately $4000 in a traditional IRAs to be the same after taxes in this tax year. The additional money in the traditional IRA tends to lessen the advantage of the Roth IRA.

I'm a little confused by this argument, Greg. What additional money are you referring to? AFAIK, we are currently limited to $3,000 total, whether you pay taxes now or later.

With all of the possible changes that are possible in the future this is probably all guesswork anyway.

I agree 100% with this statement. It's kind of like poker, really. All you can do is maximize the chances that you have control of...but there's Lady Luck (or Uncle Sam as it were) that can make you or break you at any moment.

-Agg97
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