I want to start an IRA, but am uncertain which to go with: traditional or Roth?

Question

I'm contributing about 8.7% of my income to my 403(b) and have the money to start an IRA but am uncertain which of the two options would be best for me. I'm in my late twenties and plan on contributing at the end of the year for next year's tax filings and could use some suggestions. Thanks all.

Answer 1

I am in my early 20's, and I chose a Roth IRA for several reasons.

1. My income is low enough (i.e. my tax bracket is low enough) that I don't really need the tax decuction right now that a Traditional IRA offers.
2. I think my personal income tax rate will only get higher by the time I withdraw from my IRA, even if I'm in retirement when that happens, so I'd rather have a Roth so I don't have to pay taxes on my future withdrawals.

Income tax rates are at historical lows. The government will almost certainly raise tax rates before I retire in 40 years. I don't think my tax rate will ever be lower than it is today, no matter how my income level changes. So I'd rather pay taxes today, and never have to pay taxes on that money or its earnings again. I don't want to have to worry about what the govn is doing with taxes and how my retirement funds will be affected. Imagine retiring with a huge pot of money and not having to give one second thought to taxes!

Answer 2

The montly fool has a great overview...