Letters from Sanford Street # 451

So my coworker and I debated whether or not a Roth IRA or Traditional IRA makes more sense. Well, I did the math, and my conclusion is that doesn't make much of a difference either way:

Traditional IRA:

=((6000*1.12)*(1.08)^35)*0.88

87434.61202

Roth IRA:

=(6000)*(1.08)^35

88712.06577

Anyway, I'm going to stick contributing to pre-tax retirement accounts for the time being, but there is one thing about Roth accounts: people use the term "tax-free" distributions, and, it honestly bothers me when people aren't really specific with what they mean when they say: "tax-free." Well, it turns out that Roth distributions are not considered taxable income. So it might actually make sense to do both a Roth, and Traditional IRA. For example, you can take out of your Traditional IRA only what you need to stay in the lowest tax bracket, or, below the standard deduction, or whatever, and then take distributions from your Roth, or whatever. So it might make sense to blend them.

Anyway, I'm just going to stick with my original plan, people always say that taxes can change at retirement: in 35 years, taxes are likely to be higher, and that's probably true, however, one, I'm expecting the tax brackets, and the tax rates to increase in the future, and it's also possible that the tax treatment of Roth accounts can change in the future as well. Maybe the tax and spend types say: "fuck it, we're taxing your Roth distributions anyway to fund our Government Largesse Initiative." I honestly don't think that trying to predict what will happen 35 years out makes much sense either in favor of the Traditional IRA, or the Roth IRA.

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I was listening to a documentary about the medieval Saharan caravans, and camels that travelled the 4 month round-trip journey would have to be rested for 8 months afterward.

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I'm trying to think. I'm going to need new tires soon.I wrote about this before, but I think 30 thousand miles is where it needs to get done, I'm close to 29 thousand miles.