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For the deductible IRA, you save 28% on your $2000 contribution. But, when you retire, and draw on your IRA fund, the earnings on that $2000, which could now be worth $10,000.00, will be taxed at (say) 20%. Compare that to Roth where you give up that 28% savings on the $2000 contribution, but you also do not pay the 20% tax on the earnings ($10,000.00) later. Which is better? Do the math! No contest.

Comparing a straight $2000 traditional IRA contribution vs. a $2000 Roth contribution will always make the Roth look better, because such a calculation disregards the advantage of the traditional IRA, which is the current year tax savings. The person doing the $2000 traditional contribution gets a tax savings of $560 this year so they have $560 more to invest than the person doing the $2000 Roth contribution. This needs to be factored in in order to do an accurate comparison. The math has been spelled out in a couple of recent posts.

Though, this assumes that your IRA has time to accumulate through compounding over a relatively long time. The only time when deductible IRA would be better is if you think you will retire and withdraw your IRA fund within a short (5yr?) period of time.

Time is not a factor in the comparison. It's all about tax rates and rates of return.

John
...who does a Roth and a 403b because I don't know what my tax rate will be after retirement--though I don't expect it to be higher. If I work until I can make more money by retiring, then I worked too long. :-) But I still do the Roth because I believe I can use the increased flexibility of investments to get a higher return that will more than offset the tax savings I would get from making unmatched 403b contributions.
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