re: "Real" value of a Roth IRA

quote:

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I am only 25 years old and in the 25% bracket. If I contribute to a traditional IRA, I will receive 25% of my contributions back in tax savings. Doesn't the fact that I can use that 25% savings for 45 years somewhat outweigh the fact that I can pull that money out tax-free in retirement?

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The reason why ROTH is recommended for someone in your situation is - you're likely to have a higher income at retirement than you do now, ergo, you want as much of that as possible immune from taxation.

An opposite situation would be a professional athlete, whose earnings are sky high right now and needs every penny of tax savings (which are real, no question, even at your tax bracket) he can get his hands on. He maxes out his traditional 401K/IRA, or whatever is available, because his tax rate at retirement will likely be less than it is now.

I hope this makes sense from the "rule of thumb". However, everyone's situation varies, at least a little, and there are times when the knee jerk "ROTH" recommendation does not pass the A/B, 2-track analysis. If it doesn't for you, take the immediate benefit of tax savings now, and take solace that if you lose money down the line, you did so with eyes open, and you at least did the analysis.