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Subject:  Re: IRA vs. Roth IRA Tax Savings Date:  12/20/2007  12:49 PM
Author:  Watty56 Number:  60459 of 90436

In addition to having to make assumptions about unknowable future events, there are several other problems with trying to do a mathematical model of which is best there are several other problems with mathematical models.

1) The consequences of making an incorrect choice is not symmetrical. By this I mean that if you choose the Roth and end up having low income in retirement, the lack of money could have severe consequences. If you choose the Traditional IRA, and end up very wealthy in retirement, then the higher taxes could cause you to have to take a shorter cruise for your vacation.

2) In all likelihood, there isn't a correct choice and the real answer is to have a mixture of both.

3) The right type of account when you are 65, may not be the right choice when you are 95 and have drawn down most of you retirement savings. Assuming that you have a paid off house when you retire, once you start slowing down in your 70's then, other than medical expenses, you really won't need that much income live on while you health is reasonably good.

4) If you end up with excess money in a traditional IRA, you can roll it into a Roth when you are retired and have years where you are in a low tax bracket. You can't do the opposite if you end up with too much in a Roth.

My approach has been to focus on the Tradition IRA and 401k early in my savings because I could save more because of the tax deduction. I considered this my core savings to cover my basic needs in retirement.

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