|IRA Choice For Higher Return|
|Tax Rate in Retirement||Roth IRA||Traditional IRA|
In a previous post on choosing between a Roth or Traditional IRA , I showed that a Roth had a better return when the tax rate was the same after retirement. In The Best Retirement Deal by Walter Updegrave, he agrees with the equal tax rate analysis and shows the results for both lower and higher tax rates after retirement. His conclusion is that one cannot predict future tax rates and therefore, should put some retirement funds in a Roth IRA.
Being somewhat pessimistic, I expect that my daughter's tax rate will likely be higher after retirement than in her working years. Therefore, I would recommend putting savings in a Roth IRA if she qualifies. If she doesn't qualify for a Roth IRA, I would still have her put money into a non-deductible IRA.
For more on Crossing Generations, check back every Thursday for a new segment.
This is not financial, saving or retirement advice. Please consult a professional advisor.
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