Grading a Roth vs. traditional IRA
Jan0
Whether to invest into an ordinary tax-advantaged employer plan and IRA personal accounts versus investing in “Roth” IRA and tax-advantaged employer plan retirement accounts is not always a straightforward decision.
The choice on the trade offs is one of the most complex decisions of do-it-yourself financial planning. A lot of personal finance issues can affect whether a ordinary IRA or tax-advantaged employer plan account contribution versus a Roth tax-advantaged employer plan or IRA personal account contribution decision would be better.
In most circumstances making investments into a traditional IRA or tax-advantaged employer plan retirement accounts is the better decision, when those contributions would be currently tax deductible.
Over a lifetime the analysis is quite complicated. Rules-of-thumb are not sufficient to analyze the many important personal financial factors. The preference is not just about present versus future tax rates. Instead, the choice requires a comprehensive financial projection and analysis of the family’s life cycle savings, taxes, and assets.
(Look here for a comprehensive Roth retirement planning calculator that makes automatic this traditional IRA or tax-advantaged employer plan account versus investing in “Roth” IRA or tax-advantaged employer plan personal account calculation.)
Whether or not a person will save enough to invest efficiently over their lives is most important in the Roth retirement account versus the “currently tax deductible” regular retirement account additional investment decision.
When a person does not earn a sufficiently high income, does not control consumption to save a lot, cannot dramatically reduce investment expenses, and/or cannot build up a large enough investment asset portfolio, then that investor will not have to worry about being in high income tax rates when retired — whether or not federal and state tax have changed by retirement. If a person does not have sufficiently large assets and income when retired, then the present tax savings an investor can get from deciding on a traditional retirement account contribution will tend to be more economically advantageous over a life cycle.
Note: This article ONLY talks about financial situations where the person has the choice of making a “deductible against current income taxes” traditional IRA or 401k contribution versus a currently “not deductible against current income taxes” Roth IRA or 401k additional investment. If you cannot get the deduction this year but can make a Roth deposit, then the Roth deposit is better.
A comprehensive and automated lifetime planner with a Roth IRA vs traditional IRA calculator is a must to develop a much more reasonable family financial strategy
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Do You Have A Serious Financial Plan To Create Wealth? It Is Never Too Late
Jul0
Possibly with all the economic upheaval we are seeing in the economy you are becoming more concerned about your own economic future. However, if you have a solid financial plan you do not have to be in a state of ongoing worry.
One of the more scary current problems involves the sad condition of the banking system. If you happen to have a business you are probably very aware of the lack of capital being lent for improvements, expansions and equipment. The whole situation is quite frustrating knowing that the government is injecting funding into the banks and they are not using the money to help their good customers.
Because of this it would seem that you might want to come up with new ways to function in your business and personal life that removes the banking middleman. I am sure you would agree that if you could avoid paying interest on all your loans you could significantly increase your wealth quickly.
At this point you are probably saying, “How could that be a possibility?” The answer really is simpler than you would imagine. And the beauty of the idea is that you can assemble the pieces with probably little effort.
The goal in this exercise would be to become your own functioning bank. Some far-sighted financial advisors have come up with a way to use a common financial services product in ways that it was never imagined to be used. But, the end result is a marvel of efficiency in saving you money and providing a great investment model.
In this dynamically changing world, the more you can do to control all aspects of the financial factors that influence you is a smart strategy. If that sounds right to you, then you might want to start researching how to build your own personal bank.
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