When I Save for Retirement, I Choose the Roth IRA. Here's Why.
The traditional IRA vs. Roth IRA debate is one of the most hotly contested in all of personal finance. And there are solid arguments for each side. But I know how important it is always to save for retirement, and here's why I prefer to save in the Roth IRA.
One of the core arguments for a traditional IRA is that it gives you a tax break right now -- when you contribute -- so you get to pocket that cash immediately. And don't get me wrong: I think that argument makes a lot of sense. But I'm an optimist, and so I go Roth.
The core issue is tax rates: Will you pay more in taxes now or later? Because you pay taxes either way -- either up front by contributing after-tax dollars to the Roth, or later if you contribute pre-tax dollars to the traditional. I like to think that I'll have a lot more money in retirement than I do now -- and will have a higher income because of all those investments, too. So I'd rather eat my vegetables now, get the taxes out of the way, and reap the benefits later when I have a lot less optionality.
Source: Fool.com
