Originally Posted by
XJ86
Go and check out MPI by suncor financial. Download the free book and look at the section of ira vs roth. You end up paying the same taxes and the account values are the same after the taxes.
1 dollar roth grows to 10 at retirement you take 10 tax free
1.3 dollar ira grow to 13 and you take out 13 and pay the same 30 % taxes cause lets face it we all are gonna not be down much in brackets now. You still have 10 dollars.
The math is correct, but the equation it solves is not relevant to high income earners. The calculator ignores the upper constraints on contributions limposed by the IRS, nor does it consider the negative consequences of RMDs.
-You can't contribute 1.3 times the Roth amount into a Traditional account, they both have the same upper limit. This gives the Roth account 30% more capacity for retirement savings. You can't carry 1.3 gallons of water in a 1 gallon bucket.
-RMDs force distributions, that could be left to grow in the case of a Roth account. While not easily quantifiable it is easy to assess good/bad in a binary fashion. There is no downside of eliminating RMDs, only upside in greater compounding and income flexibility.
Having a mix of Roth and Traditional accounts may be the best option. It provides flexibility of withdrawing taxable and non-taxable funds, serves as a hedge against future tax policy and provides some protection from RMDs