| Jim: I thought as you do - Roth my retirement funds now and forget about future taxes. And I did do that for several years. Then I did a spreadsheet to play with how much I would be ahead. I was shocked to find that it was better NOT to Roth now. For example: Assume you have $5,000 per year to invest in some way
Assume any investment realizes 12% gain each year
Assume your current tax rate is 15%
Assume at the end of 30 years you pay taxes on all tax deferred funds
Assume your tax rate after 30 years is 35% For simplicity, I’ve applied calculations to year end totals only Tax-deferred account: If you put $5,000 at the end of each year into a tax deferred account for 30 years, at the end of 30 years you’ll have $1,206,663 (remember, at the end of year one you had just put $5,000 into the fund, so you didn’t have any cap gains for that year). After 30 years, when you pay taxes of 35%, you have a net of $784,331. Roth account: With the same $5,000 to invest each year, $4250 of that money actually goes into the Roth account, and the $750 difference pays the taxes. At the end of 30 years, your Roth balance, which is tax free, is $666,682. Net: You have a larger nest egg ($117,650 more) after taxes are paid, by having put your funds in a tax deferred account. I’ve played with various annual contributions and tax rates. The net results always favor making yearly contributions to a tax deferred account and paying taxes "later", even if the tax rates then are higher. It’s the power of compounding. Google "retirement calculators" and you’ll find many sites that let you play "what-if". Don’t forget to consider that when you make a Roth contribution, you essentially pay income tax on that money now. The capital gains and compound growth you might otherwise realize on those dollars paid in taxes is a "cost" to you. June | 
