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William Lipp says:
You've fallen into the trap. The issue isn't saving taxes, the issue is maximizing wealth. You are correct that you would pay more taxes,
but you would end up with the same amount of money for yourself.

I think you have fallen into a different trap...

To simplify, tax rate=20% forever, cap gains tax rate=15%, all investments grow @ 10% per year. Assume you have $2500 (pre-tax) to invest this year and 10 years to retirement - at which time you take a lump sum.

Scenario 1: $2000 pre-tax money to trad IRA, remaining $500 - 20% (=$to a regular investment account. In 10 years, trad IRA grows to $5187.50 which comes to $4150 after taxes. The taxable acct grows to $1037.50 which is taxed down to 1037.50 - (1037.50-400)*.15 = $941.88. Total lump sum = $5091.88.

Scenario 2: $2500 - 20% = $2000 after-tax into Roth IRA. In 10 years, this grows to $5187.50 with no taxes to be taken out.

Did I miss anything?

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