In the US, if you make a lot, are covered by a work retirement account or you contribute to a Roth, you can’t deduct traditional ira contributions right?
So that money gets added to the rest of your traditional ira monies right? and then when you hit retirement age, you have to pay income level taxes on deductions on that already post tax money right?
Why get taxed twice? What’s the benefit? +Not being able to touch it til retirement age.
A traditional IRA is tax free going in, but taxed coming out. A Roth is the opposite and taxed going in, but tax free coming out.
Mathematically, they’re equivalent. The only reason to choose one over the other is your personal income tax rate. If you think you’ll pay a lower tax rate in retirement (because you won’t be making as much, and thus will be in a lower tax bracket), then you’d pick a standard IRA. If you have a shit job now and expect to make more later, a Roth would make more sense.
You’re correct about the now vs. later part but I’ll also note that tax laws can change and some people think that getting ahead of the curve and confirming their taxes now via Roth has value. I’m not one of them, but it’s certainly a strategy.
That’s true if you get the tax deduction. If you don’t get the tax deduction, a traditional IRA, is like a brokerage account but you pay regular income tax instead of capital gains tax on the gains.