I was looking into retirement savings options and a colleague suggested a Roth IRA. So I looked into it and found that it uses post-tax dollars instead of pre-tax. Why in the world would you want this? I see two obvious problems with this approach:
1) It assumes you will be in a higher tax bracket at the time of retirement than now. I assume this is possible, but I would think that for most people this would not be the case. After all, you're not actually working at this time in your life. That's why its called retirement. Not something else. Something that might suggest rolling in the dough. Like working. Although, I do that now and I am hardly rolling in any such dough.
2) Using post-tax dollars gives you less total capital to invest. It goes against the principals of maximizing earnings and profits using dollar-cost-averaging. Furthermore, it defies the ultimate rule of all investing: more is better. More, more, more, more!!!!
But once again, I call upon you, oh faithful blog readers (aka, Tina, Steve, and Jimmy) to fill me in on why someone might want to go with a Roth over a traditional IRA. I know this very question has been burning within each of you for as long as you can remember.
Wednesday, November 01, 2006
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