In a traditional IRA, the advantage is that you invest before tax dollars and pay no tax on gains while holing the investment.  Because income compounds tax free, your investment grows faster than in a taxed account. The disadvantage is that all the money you take out (100%) is taxed as ordinary income; there is no capital gain treatment.  The theory is that you will be in a lower tax bracket in retirement and thus pay less taxes in retirement than now.  There are two problems with his theory:

1. Often your retirement income after deductions is not much less than your working income; at least that is the goal I set for my clients. Therefore, for you may be in the same tax bracket (but perhaps not the same tax rate) and have no real saving.

2. Taxes today are at an historic low and I am certain that taxes will be higher in the future.  Therefore you will defer taxes at a very low rate today until retirement when you will pay taxes at a higher rate.  That is not what we intend to do.

If you can afford it the better options is to pay low taxes today by funding a Roth IRA with after tax dollars.  The result will be tax free withdrawal for the rest of your life and tax free distribution after death.  This is a much better long term outcome.

Give it some thought.

Larry Hollatz, RFC®