Individual Retirement AccountHmmmmm… Which to choose… I’m not really sure. I’ve researched the advantages and disadvantages of both and it’s just left me more confused than I was at the start.

It seems most folks my age (32) lean heavily towards the Roth IRA because it’s taxed now and not in the future when you expect to be in a higher tax bracket.

But unlike most folks my age, I’m a little bit more realistic when it comes to my earning potential and what tax bracket I’ll fall in to fifteen to twenty years down the road. I’m not optimistic.

When nearing retirement, though taxes will most likely have gone up, I actually expect to be in a lower tax bracket than I am now so that “advantage” of the Roth is totally lost on me. The Traditional IRA wins out.

On the other hand, with a Roth IRA, you can make withdrawals all along without penalty. No waiting until turing 59 and a half. If I need another $5k to build my dream garage or something, I can grab it from my Roth IRA and not get hit with a bunch of fees, penalties, and/or taxes. In that respect, the Roth IRA is clearly better.

By the end of this year, I’ll easily have enough to fully fund one or the other. Obviously I’m still having a hard time deciding which is the wiser course of action.

Further, I still struggle to come to terms with the idea that being limited to $5k per year will add up very quickly or keep me interested.

I realized that the limit is increased slightly every few years, but even still — what takes me just three years of contributing to my 401k will take over a decade with either type of IRA.

It just seems…slow? It is slow.

The advantages, from my perspective, don’t outweigh the limitations — specifically, the low contribution limits.

It seems like they’re little more than a way to supplement your savings — being limited to such a small contribution, it’s certainly not jump starting anything. It can’t.

But maybe I’m *still* missing something…


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  1. And depending on how your IRA is invested… you could lose money (like I did after 9-11, then it built back up and I’m slowly losing it again!).

    401K is a much safer bet I think! I haven’t contributed to my IRA in 9 years… no regrets! (I’m 35!)

  2. For those of us who aren’t even near that contribution level yet, they’re a decent option. 5k is still more than 10% of the combined income of my hubby & me; this also means that we most likely will be in a higher tax bracket when we’re older, as we’re in almost the lowest one right now. I have a TIAA-CREF account through my work, but there’s absolutely no matching, and so that incentive isn’t there either.

  3. You’re right fizzg. If you don’t have the option of contributing to something with an employer match, it’s definitely something to look into — better than nothing I suppose.

    I guess I just don’t understand the excitement over them when the limitations are so great. When the time comes that your family is able to contribute 15 or 20 percent of your income (even if it doesn’t increase), you won’t be able to because of the limitation.

    You’ve already hit the ceiling — but your pile of money isn’t growing very fast. Tax benefits or not, sometimes I think plain old limitless mutual funds are the better route… More money grows more faster…

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