Traditional IRA Vs Roth -- May 28, 2024

Locator: 47976IRA.

This is not an investment site. I have had no formal training in "money matters" of any sort. The following is simply how I see things and not advice or recommendations for anyone else. It is advice for my extended family members. I assume there will be content errors, and typographical errors. If something seems wrong, it probably is wrong. If this is important to you, even though it's not meant for you, go to the source. Don't take my advice.

So, awhile back, I wrote, with regard whether to fund a traditional IRA or a Roth IRA if given the opportunity / choice:

Traditional IRA or Roth IRA:

• the only "good" thing that a traditional IRA provides that a Roth IRA does not: a very, very minor tax break
• the tax break makes you feel good
• in fact, the tax break the traditional IRA provides is nothing -- absolutely nothing -- compared to the tax advantages of the Roth IRA
• if you really, really want that tax break that a traditional IRA provides, invest only in a Roth IRA but calculate the taxes you would save by investing in a traditional IRA: I will pay you that amount of savings in cash when you file your taxes (this was written for one extended family member and applied only to that one extended family member)
  
• note: in 2033, RMDs required starting at age 75.  
• Roth IRAs: RMDs never required.

I've said that for years. My original IRA was a traditional IRA -- Roth IRAs did not exist. When Roth IRAs came along, the general advice, it seemed, was to open a traditional IRA, not a Roth IRA. Somewhere along the line, to "diversify," I opened a Roth IRA but kept the traditional IRAs. Never converted.

But I continued to believe that the Roth IRA was "head and shoulders" better than a traditional IRA. In my mind, there was no comparison, no question which was better. The arguments that sophisticated financial advisors made -- that the traditional IRA was superior -- were inherently inconsistent -- their reasoning made no sense -- so believe me, take the Roth IRA, forget about the traditional IRA.

And guess what? I'm so correct, there's a small cottage industry in the US now where financial advisors help you convert your traditional IRA to Roth IRAs. That's how good Roth IRAs are. Everyone now realizes how incredibly awful the traditional IRA is compared to the Roth IRA. 

How bad is it?

From CNBC today: 

It's not a slam dunk only because of the fees and taxes involved to make the conversion. 

It still irks me when I see financial advice columnists advising folks to open a traditional IRA, rather than a Roth IRA.