No. of Recommendations: 5
Which is best first? The Roth while we're eligible, or the traditional?

I would definitely put the $$$ in a Roth, especially since you may not be eligible for it in the near future. There's a couple of reasons why:

1. You pay taxes on your contributions now (at your current tax rate) rather than at a future (higher, most likely) tax rate later on.

2. You can take out your contributions from a Roth IRA penalty-free at any time. I'm of the opinion that the more flexible the money is, the more powerful it is.

3. "Tax Diversification" purposes. While the Roth IRA looks like a great deal now, Congress can change that in a heartbeat. Since you'll be forced to start contributing to a Traditional IRA in the foreseeable future, I would want some investments which are still tax-advantaged, but advantaged in a different way. So, you are less susceptible to changes Congress decides to make.

4. You can put more "after-tax" money in a Roth than you can in a Traditional. In effect, you're saving more of your income, because you divide your $3,000 contribution by your after-tax income rather than your gross income. So, while it's still $3,000 either way, with a Roth, all of the $3,000 is YOUR money. In a Traditional IRA, you're in effect investing for both yourself and Uncle Sam. The better you do, the better he does.

So, in summary. Go with a Roth. That what I'm doing.

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.