Why should I invest in a Roth IRA Vs a taxable account and vise versa?

No. Say you expect to make 100k a year in your career life. You take out the max in tax deductions by contributing to your Roth IRA (something like 6k). This reduces your taxable income by 6k in your working years which would've been taxed at a high tax bracket.

When you're retired after 65 and you take yearly distributions of which are now likely your sole income, this is probably significantly less than your career days. This is taxed at a much lower rate.

Look at marginal tax rates and then think how you can best skew your income to be lower and more even throughout your life. Retirement plans are the best tool for the working man to get tax advantages in life. If this makes sense to use in your financial situation, then maybe a Roth IRA is for you.

Keep in mind if you're contributing to an employer 401k or similar retirement plan you can't always deduct the full amount by contributing to your IRA. If you're a high earner with a 401k, a Roth IRA might not make sense to use.

There are more nuances to it but this is just the very basic jist.

/r/investing Thread Parent