As an independent contractor, I pay more taxes than someone who is on salary with a company. Given that, would I benefit more from a traditional IRA that will give me more tax savings now, as oppose to a Roth IRA which will give me more tax savings when retired?
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1 Answer
Your question is meaningless as it is, because you don't tell us if you're likely to be in a higher bracket when you retire, or lower.
However, I would argue that neither would be as beneficial for you as a Solo 401K account, as the limits for 401K contributions are much higher than IRA (Roth or not Roth).
There are plenty of questions on the topic on the right side of the screen, under "Related", check them out.
answered Apr 6, 2012 at 23:14
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And the Solo 401(k) is also available as a Roth. Fewer brokers offer, but they're still out there. Commented Apr 7, 2012 at 5:02
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+1 for the 401k recommendation. If Susan is truly an independent contractor (versus an employee of a consulting firm), then the "safe harbor" rules allow for some remarkable bookkeeping. Commented Apr 7, 2012 at 12:47
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That said, there's no reason not to put after-tax money in a Roth as well. Commented Apr 7, 2012 at 12:48
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@kdgregory - without knowing a few bits of information, among them, susan's current marginal rate, age, general level of savings so far, she may be better off going pre-tax as much as she can. Why do you suggest Roth instead? Commented Apr 7, 2012 at 20:08
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1By definition, the dollars put into Roth are instead. Even if it's $100, it's instead. I refer you to an article I wrote, and recently updated with 2012 numbers. dontmesswithtaxes.typepad.com/dont_mess_with_taxes/2012/01/… I maintain my assertion that the number of people who save their way to a higher bracket in retirement is the exception, not the rule. There are times to use Roth, but not at every stage of one's life. (we still have no details from the OP, BTW) Commented Apr 8, 2012 at 18:37