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April 16, 2010


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Why would they recommend a Roth as a must-have? From what I have read, by taking advantage of a Roth over a typical 401k/IRA, all you are really doing is betting that your tax rate now is lower than what your tax rate will be when you retire, which does seem likely, but is not a foregone conclusion.

The article did mention something I was not aware of- that contributions to a Roth can be withdrawn without penalty at any time. That is nice for a little additional peace of mind, but I wouldn't necessarily recommend it for a typical person with spending and impulse control problems.

Am I missing something? Is there an article I should read that will convince me I am wrong?

For most people, a Roth would give them a better tax rate - you are obviously younger when you contribute and if you are early in your career you are making less money(and hence a lower tax bracket). Give the deficit, it is also almost a no-brainer that taxes are on the way up.

Apart from asset allocation, some planners talk about tax allocation. It is also allows some hedging so that some money in retirement is coming from ones IRAs and 401Ks and some money from Roths and some money from things such as dividends and capital gains that may have better (or worse tax rates)

My list would probably be shorter too.
1. Set up a tight budget that allows you to enjoy life a little.
2. Automate and forget, then revisit quarterly and adjust
3. find ways to earn more income so you can accelerate the plan
Rinse and repeat.

Very brief but this will definitely be useful for me. I need to get my finances back on track, I kept trying different methods based on what I've read but I don't get any luck. I don't blame the method, I guess the time I put into it. This one is more direct and I think something I could follow and don't require too much time. Thanks.

A Roth IRA is very useful if you cannot contribute to a deductible IRA (due to income limits).

Tip#4 - I think it should just say come up with an asset allocation you are comfortable with (be it 90% equities or 10% equities).

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