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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75649  
Subject: Re: Why a Roth IRA ? Date: 2/8/1999 8:25 PM
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If I may, I believe that various posters are talking paet one another becasue of some unstated assumptions. Long post to follow ( :->).

I believe the original posting was assuming that the total amount of money available for taxes and investing were fixed and that the regular IRA contribution was deductible, therefore more money would be available to be put in the tax-deductible IRA then in the Roth IRA because taxes would not be paid on the regular IRA money. With these assumptions, I also believe the orignial poster's assertion was correct.

Other posters seem to be ssuming either that the regular IRA was not tax deductible or that the total invested in the regular IRA was the same dollar amount as that invested in the Roth IRA ewither because the regular IRA was not tax deductible or becasue the taxes on the Roth IRA were paid from other funds. With these assumptions, I believe that these posters were generally correct, especially with the $2000 annual cap.

I agree that if a contribution to a regular IRA is not tax deductible, then it is a no brainer that a Roth IRA is better than a regular IRA. If, however, the regular IRA would be tax deductible then it depends in part on the total amount of money available to invest in the IRA and to pay taxes, and on assumptions about future tax rates.

I tend to prefer "a bird in hand" with current deductions, because then I know what I am saving. Paying taxes now, if I am not obligated to, in order to save on future taxes ("two in the bush") is to much like betting on the come for me.

One poster referenced his hope that changing the rulles with respect to Roth IRA would become a "third rail" issue, but I have no confidence that a future Congress will no change the rules with respect to Roth IRAs and make them like regular non-deductible IRAs are now - earnings compound tax-free, after-tax money comes out tax free and earnings are taxed as income. I certainly think this result is both legal and constitutional and likely to happen at some time.

As others have pointed out, who really knows what taxes will be in the future. What if the flat taxers get to rewrite the tax code? What if we move to a VAT (value added tax) instead of an income tax? etc. As I said earlier, I would rather keep my money today (bird in hand). I realize that this is not without risk, and runs contrary to much of the advice contained in this board about converting existing IRAs to Roth IRAs, but it is what I think, and is that not really what TMF is trying to teach us.

Please excuse my lengthy rambling.
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