>>Joe contributes $2000 of take-home pay to the IRA each year. Mary writes the IRA company a check for $2000, but come next April she gets back $600 of that from the government (due to the tax deduction). So her out-of-pocket cost is only $1400.At retirement, Joe's IRA has $2,000,000 worth and Mary's has $2,000,000. But Mary has to pay taxes on that when she withdraws (not all at once, we hope) so the traditional IRA isn't worth as much as the Roth.<<So the question is whether the $600 a year that Mary has extra to invest in a taxable account (where, in addition to the capital gains upon selling, also has taxable dividends and capital gains distributions) makes up for the differences in the IRA balances after taxes. That probably depends on a lot of things, including tax brackets, what investment is chosen, and how long till retirement. I'm not sure how to model this in a spreadsheet. Note that if Joe's income is too high to deduct a traditional IRA contribution but low enough to still make a Roth contribution, it's a no-brainer for the Roth.
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