Story Comments

BlankenshipFP

While I share Mr. Keating's enthusiasm over the Roth IRA and the benefits of investing therein, there is a slight oversight in his "math" as reported:

It was mentioned that in order to achieve the same benefit with a traditional IRA as a $5,000 contribution in a Roth IRA, the taxpayer would need to invest a total of $6,944, assuming a 28% tax bracket. What isn't pointed out is that, given the 28% tax bracket, in order to make the $5,000 contribution to a Roth IRA, the individual must earn $6,944 in order to have a net $5,000 available for his Roth IRA contribution.

Effectively, if tax rates remain the same and the differential is always invested, the Roth IRA and the traditional IRA are roughly equivalent. But tax rates are bound to be on the rise - making the Roth IRA more attractive. Adding in the "no RMD" factor is just icing on the cake.

Jim Blankenship, CFP®, EA