@Critter-3 wrote:
This is something you have to decide for yourself and it will depend a lot on how long you have to go until you retire and start taking distributions so a talk with a financial planner and or a local tax pro so you can get personal suggestions for your individual situation.
Just some general info:
>contribute $100,000 to a traditional IRA get 22% tax savings now ... later the account may be worth $150,000 and every penny of the distribution is taxable at your current tax rate ... so 100K x 22% = 22,000 saved now but if the tax rates do not change and your income remains the same $150,000 x 22% = 33,000.
>contribute $100,000 to a ROTH and pay the 22% taxes now ... later the account may be worth $150,000 and all of the distributions are tax free. A difference of $11,000 if nothing changes.
I know that's the standard thinking, but if we assume my income now is $100,000 per year, anything I put in pre-tax saves 22%, because it comes off the top. However, in retirement, let's say I want an income of $70,000, and $30,000 is (partly-taxable) social security. My IRA draw ($40,000) would be mostly taxed at 12%, thanks to the standard deduction and partial social security exclusion.
In other words, the deduction is off the top, but the tax owed is calculated from the bottom up.
But on the other other hand, if all my retirement income was Roth, SS would not be taxable at all, which is yet another factor that confuses me further.
