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Traditional vs Roth IRAs - Which is Better?


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    Anyone here investing in/know about IRAs? If so which type do you recommend going with and why? There are traditional IRAs and Roth IRAs as the two main types. Traditional and Roth IRAs (IRS.gov comparison table)

    Seems to me traditional IRAs can be more attractive if you qualify to deduct your contributions from your taxes, but the downside is you have to take minimum required distributions later in life and distributions and withdrawals will be taxed.

    In comparison, you can't deduct any Roth IRA contributions from your taxes, but you can qualify for free withdrawals and distributions.

    Since both types have the same contribution limits per year, is there a clear winner here? Any other differences to consider? Seems like it all comes out the same in the wash, but why is it I hear most proclaiming Roth IRAs superior?

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    My financial adviser encouraged me to invest in both.

    He broke it down to me this way: Roth IRA's are you planning on your tax rate at retirement being higher and Traditional IRA's are you planning that they will be roughly the same or lower. Since I am able to invest in both right now he suggested I do that. Then I'm prepared for whatever life brings me and can invest accordingly as I get older.

    If you can't afford to invest in both then it's just a matter of what you think is best for you. I personally like Roth's because once I start withdrawing from it, the money is all mine tax free.

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    The Big Burry Wrote:

    My financial adviser encouraged me to invest in both.

    He broke it down to me this way: Roth IRA's are you planning on your tax rate at retirement being higher and Traditional IRA's are you planning that they will be roughly the same or lower. Since I am able to invest in both right now he suggested I do that. Then I'm prepared for whatever life brings me and can invest accordingly as I get older.

    If you can't afford to invest in both then it's just a matter of what you think is best for you. I personally like Roth's because once I start withdrawing from it, the money is all mine tax free.

    Thanks. That makes sense. It does seem to be the difference between benefits now vs benefits later. I am usually for instant gratification, and a bit more short term in thinking. Meaning thinking in 3-5 years at a time instead of decades and decades from now. But point well taken. Both is a good idea, honestly didn't consider that so this helps.