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Okay, I've been wondering about this, and I think I'm right, but I'd like some confirmation (or correction, as the case may be).

Let's say I have a 401k at work, and my AGI is in the 60k-100k range. My current tax bracket is X%, and my retirement tax bracket is Y%.

My current income puts me above the limit for deductible contributions to a Traditional IRA. Any money I contribute to a Trad IRA will be taxed at X% now (as I earn it), and taxed again at Y% later (when I withdraw it). Correct?

For a Roth, I am still taxed at X% on my contributions now.
Case A: Roth withdrawls are still tax free when I retire. Then I am choosing now between the Trad (Tax now at X% + later at Y%) and the Roth (tax now at X% and later at 0%). No brainer.

Case B: Roth withdrawls are taxed as income (worst case, ordinary, at Y%). Then the two options are a wash. Tax now at X%, later at Y%. Roth is at least no worse than Trad

Case C: National sales tax, at Z% of consumption. Both IRA's are now Tax now X%, later 0%, and my consumption (presumably the same regardless of IRA choice) is taxed at Z%.

In either case, unless Congress levies a "penalty" tax on Roths (Roth income taxed higher than other income), why would someone in this income group choose a Trad IRA over a Roth???

If there is a flaw in my logic, PLEASE point it out before I complete my 401(k) rollover from my former employer! :-)

OTOH, I can see that the situation would be much different were my AGI below the Trad deductible limit or the Roth income limit.

BTW, when (hopefully) our income breaks the Roth limit, what's stopping me from leaving the Roth alone, opening a second, Trad IRA, and contributing to it?


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