No. of Recommendations: 0
On your point #1:  I agree completely.  I was just
trying to stay consistent with the original
assumptions.  Using a 20% tax rate for the non-IRA
account would yield the following numbers:

  $1.80 ($2 - Tax: $0.20)
  $2.88 ($3.60 - Tax: $0.72)
  $4.61 ($5.76 - Tax: $1.15)

total: $12.61

Your point #2:  Again, I agree with you.  It also does
not take into account any dividends generated which
would be taxed at your income tax rate.

Furthermore, this example is too simplistic to prove
the point one way or the other.  What you really have
to do is run it through a spreadsheet to see the
effects year-over-year.

The biggest effect that is missing from the Traditional
IRA, and the thing that I think really kills it, is
the fact that for $X amount of income per year, you
must withdraw $X/(1-tax_rate).  With a Roth IRA, you
would only withdraw $X amount.  This means that your
Traditional IRA gets depleted much faster then the
Roth with hurts its overall return.


P.S.  I have a Excel spreadsheet that I wrote that
I would be glad to share with other Fools.  It
would be nice to have someone else review the work.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.