Traditional or Roth

Roth. Much better the longer you have until you begin using that IRA money. You might grow a huge nestegg over 20-40 years, and then get to snub the gov't when you take it out.

Roth all the way if you qualify. Of course, since you post on letsrun you make at least $200k a year and thus do not qualify, but that is besides the point.

The reason a Roth is better in my opinion is that you never know where taxes are going. However, the capital gains tax rate is set to expire shortly, and I can see both Rs and Ds raising tax rates in the long run. Ds will raise it for handouts, Rs for who knows what. A Roth lets you keep all of your money tax free.

Roth. Taxes are only going up. Unless you think Ron Paul started a movement, hedge against high tax rates.

It is impossible to say for sure without making a lot of assumptions about tax rates and knowing more about your personal income. Several years I was able to max out my Roth without incurring any additional taxes (high mortgage interest and lots of deductions), so it was a no brainer for me.

I think Roth's are better for most people, but there is no guarantee Congress will not take away the tax free withdrawals.

Mr. Obvious wrote:

there is no guarantee Congress will not take away the tax free withdrawals.

Bingo. I max out my traditional 401(K) and Roth IRA, but I would never want to put all my eggs in just a Roth. For anyone that thinks that money can never be subject to tax, think again. It's the government and they can and will find a way to get your money...maybe in 30 years they will install a value added tax, raise the AMT or whatever. Just don't be blindsided into thinking withdrawals will be "tax-free."

I would go with the traditional exactly for the reasons listed above...You KNOW that money is NOT being taxed now. You don't know what the government will do to your Roth withdrawals in the future.

I just got taxed 30% on my Roth. Don't transfer from an old 401k.

ways wrote:

I just got taxed 30% on my Roth. Don't transfer from an old 401k.

You didn't get taxed on your Roth. You were taxed for taking money out of your 401k.

In general -

the first thing you want to do is put enough money into a 401k to get your employers full match, after that, max out a Roth IRA (if you qualify), and then go back to your 401k.

people are right noone knows for sure that taxes will do this or that or if congress will levy some sort of additional burden onto Roth gains(you are already being taxed on the income so you wouldn't be taxed additionally on that) in the future but that is not reason enough to change the above order. If you qualify for Roth now then your tax rate isn't too high and you might at well get taxed now rather than later.

ways wrote:

I just got taxed 30% on my Roth. Don't transfer from an old 401k.

no tax unless you did a conversion

Roth is WAY better

traditional is ok for consumption, but it is a TERRIBLE legacy asset if you end up passing it down the next generation

It is simple. Your tax bracket dictates.

Your tax bracket now: The higher the bracket, the more towards Traditional you go. For example, 30% more money in the fund is better than 30% less money. If you are getting paid under the table, duh, Roth.

Your tax bracket at retirement: Will it be higher or lower than now? If it is lower, Traditional... higher...hmmm. Usually people go into a lower bracket at retirement.

I just got a stupid card from Fidlity with two pie charts showing traditional versus roth. They both had the same amount of money and, of course, was pushing the Roth. Stupid since the traditional wold likely have more money in it if I were to compare apples to apples.

In my guesstimation, the Roth was designed for lower tax bracket people.

you moron, both the roth and the traditional have the same cap so its not true that the traditional would have more money in it.

the tax deduction for traditional is capped. the ability to contribute to a roth is capped. so the options are reduced dramatically as income goes up. above middle class incomes only a post-tax deduction to traditional is possible.

what is a post-tax deduction?

If you qualify for a roth you do the roth bottom line.

Traditional IRAs can get dicey because there is a small line between when you qualify for Roth and were you make too much money to even write off the Traditional Contribution as a deduction.

It sucks. I'm going through it now. I used to do a roth but now i make too much money to do a roth and I make too much money to even take the deduction on my traditional contribution.

The other posters complaint about Fidelity was stupid because regardless of the type of IRA the contribution limit is the same and your "take home" after retirement would be larger from a Roth since both the gain and the original investment are tax free vs. the traditional. the traditional WOULD NOT have a larger amount of money in it.

Investomatic wrote:

Which one should I go with? I know traditional is taxable and roth is not when you are cashing out. What is everyones opinions?

Most of them have it right -- for MOST people a Roth is the way to go. I could see doing a traditional IRA if you're within 5 years of retirement and you are putting enough in there to keep you from the next tax bracket and just to have a tiny extra that you hadn't planned on when you retire. Other than that very specific reason (which isn't all that much of an advantage), I'd do the Roth.