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OK, here's the background. Married filing jointly. My wife has no income. I understand that if I get her a traditional IRA at the max of $2000.00 this will realize me approximately an extra $550 back from Uncle Sam. Everything I read seems indicate the Roth is preferred to the traditional ira. But to me it doesn't make sense to let the government have the extra $550. What the actual long term outlook. Will I just lose that $550 at retirement when I withdrawl the money?


I'm sure somebody is going to explain this a lot better, but here's my attempt.

$2,000 in a Regular IRA
$560 deduction today (28% bracket)
Earn 3% in CD's for the next 25 years
Value of IRA is $4,187.
Withdraw it and pay either $1,172 (28%) or $628 (15% if your income goes down that much).

$2,000 in a Roth IRA
No deduction today
Same earnings.
Withdraw it and pay nothing. A total tax savings of $68-612.

Longer holding periods and/or higher earning rates magnify it even more.

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