Does a Roth IRA offer an advantage on future contributions?
The Roth IRA does offer an advantage, if the total amount of your contributions (both to the IRA and to a non-sheltered account) is greater than the IRA contribution limit allows. If you aren’t maximizing your IRA contributions, then the Roth IRA will give you no advantage over a traditional deductible IRA. (more…) Even though the Roth IRA looks like a better deal for me, I hate the idea of giving up the deduction I get with a deductible IRA. That’s a natural reaction, but it’s purely psychological. Don’t look at the deduction as “money you’re getting back”; look at it as “money you aren’t sheltering”. [That right there is the key to understanding the Roth IRA!] The general principle still applies here: Roth allows you to shelter a greater portion of your money. You should check the second case study to see how this works.
