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Unless I am mistaken, your investments in either IRA grow tax free. In the case of the traditional IRA, you are taxed when you withdraw the money. In the case o
by goodcanadian 10y ago
Unless I am mistaken, your investments in either IRA grow tax free. In the case of the traditional IRA, you are taxed when you withdraw the money. In the case of the Roth IRA, you are not. It is more a question of whether the returns on your investments are going to be significantly greater than your initial contributions. I certainly hope so, if you are compounding returns over decades. In that case, with a Roth IRA, you can create a lot of investment income tax free that would eventually be taxed in a traditional IRA. That, in a nutshell, is why I would prefer a Roth IRA. As a point of fact, I am not a "US person," so it is moot for me.
- idunno246 10y agoYour math is wrong, even though it feels correct. The only difference is tax rate, because you're multiplying by taxes and order doesn't matter. You pay less tax initially but have lower growth. Assuming 1%/year, (Taxes * principal) * 1.01^n, or Taxes * (principal * 1.01^n)