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Author: BGPenhollo Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75859  
Subject: Re: Which is better: 401(k) or Roth IRA? Date: 10/6/2000 8:28 AM
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JAFO being the devil's advocate posted

"Just to be devil's advocate, what if FIT is abolished and replaced by a natioanal sales tax?

"Is it better to pay 15% or 28% (present marginal rate) today if you use a Roth" and then still pay national sales tax 40 years from now if though you used a Roth IRA OR is it better to get a deduction at 15% or 28% (present marginal rate) today if you use a traditonal and then pay national sales tax 40 years from now if you use a traditional IRA."


The issue concerning Roth versus Traditional primarily hinges on what one believes their Income Tax Rate will be in the future. And obviously, a Trad IRA will beat a Roth IRA if Fed Income Tax is abolished and if elephants fly, umbrellas becoming worthless as well.

When IRA's were first introduced, I was leary of the great saving concept that I could make tax deductable contributions today and when I retire, I would be making less money and therefore paying less taxes on my withdrawals.

I saw that as the load of Bull it was. In the 70's my salary never exceeded $15,000. This Fool was smart enough to see 30 years ago that I'd be lucky if I wasn't paying $15,000 in taxes by 2015 at retirement.

What sold me on the Trad IRA was the fact that for 40+ years, I was actually using the Govt money (Taxes I didn't pay) to grow my retirement.

For me, now that the Roth is available, I will only contribute to the Roth because even with 15 years left I believe the gains not being taxed will make up for paying the taxes going in.

So if a National Sales Tax happens then all my planning is for naught.

As my pop always told me...

You pay your money and you take your chances.

BGP

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