Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I am a soon-to-be Roth IRA owner. As I understand these, you pay tax on the money going in and if you play by the rules, you never have to pay taxes on the money thereafter (so promises the government, and the government would never lie to us or break a promise it'd made, would it???? -- but flakey government is beyond the scope of this rant).

To me, this would imply that you should try to get the highest possible return on the post-tax money while it's inside the Roth. This seems so very simple and obvious to me, yet I've never seen it mentioned anywhere else. Am I missing something?

Cases (very simplified):

Regular IRA: I invest $1000 (pre tax) and when I retire, it's grown to $100,000 (might as well be optimistic). I'll pay perhaps 30% in taxes so I net $700,000.

Roth IRA: I invest $700 (say it was $1000 pre-tax), inside IRA it grows 100 fold. Worth $700,000. Ummmm....... OK, now I remember my thesis. Let's say it grows 1000 fold. That would be $7,000,000 -- all of it tax free! Oh yes, let's move it to Switzerland before Uncle Sam changes his mind...!

So using this admittedly optimistic scenario, Logic would say go for the biggest possible rewards within the Roth, and leave the more conservative strategies for the Regular IRA.

Print the post  


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.