Comment on What can I do with US$10K that is a good investment?
Zeeber@lemmy.zip 1 month agoCompound interest will far outweigh paying taxes now for a Roth. Especially if you also have a 401k, the taxes in retirement will be potentially large based on the growth of the fund over decades. A Roth makes it so you pay nominal taxes now for potential large tax free growth later.
The exception would be if you think your income will decrease in your later working years, in which case a traditional IRA could make more sense. That however is a unique case. Generally it’s better to take advantage of a Roth if you can for tax free gains later.
CrimeDad@lemmy.crimedad.work 1 month ago
I understand how having a higher income and tax rate in retirement makes a Roth attractive. However, the comparisons I’ve seen don’t fully account for the opportunity cost of paying the taxes up front in the case of a Roth, since a traditional IRA lowers your taxable income by the amount you contribute. This tax break allows for a greater contribution. In other words, I think a fairer comparison would show a greater initial contribution for a traditional IRA.