Home Forums Hunting & Shooting Hunter's Campfire Roth or Traditional IRA?

I am trying to decide if we should contribute to a Roth or Traditional IRA account in the coming years. My wife and I have both set up now and have some money built up on those accounts but looking at tax brackets I see that if we put money into Roth accounts we will probably pay 22% tax on the income before sending money to the Roth account. The 22% tax bracket, if filing jointly as a married couple, ranges from $83550 to $178150 according to this website:

https://www.debt.org/tax/brackets/

My parents retired to Ecuador in late 2011 and live pretty cheaply. My wife and I are considering doing the same thing. I wonder if we end up retiring abroad maybe we would only withdraw money from our accounts at the lower 12% tax rate which allows up to $83550. That amount typically increases a bit each year to account for inflation as I am sure most of you know.

So, the obvious question is could we live on $6962.50 per month. If so, then we would only be paying a 12% tax rate during retirement (I guess after paying that 12% tax we would actually be living on 88% of that amount or $6127 per month) instead of paying 22% in tax now if we invest in a Roth instead of a Traditional IRA.

Thoughts?

I know nothing of foreign tax laws. My money guy told me to get what I can in my Roth. He said taxes will be higher when you pull it out and he figures our wonderful government is going to do away with the Roth option because of taxes.

You need to speak to a professional financial advisor, there are more factors at play than what you have listed.

How long til you start withdrawing from the account? The wife and I put some into Roth IRAs, some in traditional IRAs, some into 401Ks (to get the company match), as well as some into mutual funds outside any retirement account. We do the latter as I’ve already retired and she plans to soon. We a several years away from 59.5.

You need to figure out if the growth in the ROTH IRA will be enough to offset the smaller, post taxed deposits. I haven’t been able to get a handle on exactly how to do that, so I do both. Either way, I’m only half wrong.

Why do you need Advise ..

You already know the answers..

With Future Taxes being the 800 Pound Gorilla in Your Calculus ..

I do a 401k and a Roth. It’s possible that a traditional IRA would be better in retirement for me but my employer sponsored 401k will get taxed enough. I like the idea of an account that will be tax free at withdrawal.

My choice is a Roth. I just funded my Roth for 2022 and I'm 77 years old.
A dollar put in a Roth and invested correctly
has the potential to grow to a million dollars plus and you pay no taxes when you withdraw it.
Once this market correction is over a diversified mix of stocks and bonds or ETFs should give you at around 10% a year.

good advice

We go back to the Obama tax laws in 2025. We plan on transferring some Traditional IRA money to some Roth's before 2024 to beat the tax increase.

kwg

I don't trust them to not eventually tax Roths.

I have Roths. The idea is and was the initial money is taxed at current rates but the earnings never will be. Before this year my Roths had done quite well and were the right choice. I'm 63 and hope I live long enough for them to recover. The inheritance laws and withdrawal laws are better for the investor with Roths.
Good Luck to you,
Rick

I don’t trust them not to eventually tax everything and anything they can. What they can’t tax they’ll simply take.
The joys of living in a massively underwater country.

Osky

That’s in the back of my mind, but I funded a Roth as much as I could.
I also expect SS to become “means tested” eventually.

They already are when you get paid. I doubt that they could get away with taxing it twice while everything else is taxed once but who knows.

One thing in the Roth's favor is no RMD when you turn 72 unlike traditional IRAs and 401ks.

I am in the throes of converting from traditional to Roth as I hit 59 1/2 last year.

IIRC, the end result was not a lot different for us using the same $$ when Traditional.vs Roth were compared. We elected to pay the tax later. I guess time will tell if that was the best choice. We’re only concerned with US tax laws. No foreign retirement for us.

So, earnings on a Roth are not taxed at time of withdrawal?

Okay, I see the earnings are not taxed in many circumstances. I was not aware of that. So far, all my savings are pretax.

The answer is a slam dunk.

I am no tax accountant but I have invested in Roth IRAs and have redeemed them.

For Roth IRA you pay taxes on the money that you use to buy the IRA and you don't pay any more taxes on that money or on the money that it earns. So when you redeem that IRA it's all tax free.

Traditional IRAs are tax exempt when you buy them but you have to pay taxes on them when you redeem them. You must expect that your investment will grow, so you pay more taxes with a traditional IRA then you will on a Roth IRA.

Yeah. A ROTH is invested into with after tax dollars, and everything in that account will not be taxed when withdrawn as long as you are 59.5 years old or more.

It is a wonderful deal for a young adult who hasn’t yet hit their prime earning years (higher tax bracket), coupled with lots of time to build appreciation.