That's not true: the capital gains you accumulate are pre-tax, so your entire investment is taxed once, upon withdrawal, as income. With up-front taxation you still end up paying additional capital gains taxes at the end of the day on your total capital gain.
There are conceivable situations where you end up paying more in taxes, if your retirement income tax rate is higher than your current income tax rate plus your capital gains rate multiplied by the ratio of capital gains to the total capital.
I've spreadsheeted it out and using a 30 year timeline and what I most would consider an extremely conservative rate of return, you end up with about 15% total advantage. This can go up to 20 to 25% if you assume more aggressive returns.
Despite that, I hate the fact that your money is locked up and there is a severe penalty if you pull it out (except in a few situations, and even then the amount you can pull is limited.)
Is it worth 15% of your money for it to be truly your money? It is to me, but that's a subjective call.
> A Roth IRA almost always makes sense, which is why they are so limited.
A Roth IRA makes sense in two circumstances:
1) You have maxed out contributions to tax-deferred retirement accounts, such that the only options for additional retirement savings are Roth IRA or regular investments with no special tax benefits (i.e., post-tax contribution and capital gains tax on withdrawals.), or
2) you expect to be at a retirement-savings-excluded income esuch that the average tax on withdrawals from your retirement savings would, if taxed as income, be greater than the taxes you pay on current-year income. (Otherwise, your better off with a tax-deferred vehicle than a Roth IRA.)
There are conceivable situations where you end up paying more in taxes, if your retirement income tax rate is higher than your current income tax rate plus your capital gains rate multiplied by the ratio of capital gains to the total capital.
I've spreadsheeted it out and using a 30 year timeline and what I most would consider an extremely conservative rate of return, you end up with about 15% total advantage. This can go up to 20 to 25% if you assume more aggressive returns.
Despite that, I hate the fact that your money is locked up and there is a severe penalty if you pull it out (except in a few situations, and even then the amount you can pull is limited.)
Is it worth 15% of your money for it to be truly your money? It is to me, but that's a subjective call.