I am about to open a traditional IRA and put my money in an Index Fund (to be decided). Which has the advantage that taxes are deferred until withdrawal. It also seems that I have the advantage of being able immediately/tax-free re-invest my dividends. If I skip the IRA and place my money in the Index Fund, I would of course have to pay capital gains on earnings.
My question is what is cheaper in the long term. I have no intent of withdrawing the money. I am having a bit of trouble balancing the net gain given, paying taxes as on capital gains, thus affecting the principal (or at least my cash) versus not paying any tax until withdrawal. Are there any good charts/calculators for this?
My hunch is that an IRA where my money is in an Index Fund is better long term than an Index Fund alone if I'm just wanting to save up money for retirement. Of which, I could at a fixed/desired rate pull the needed amount of money I want (control the tax bracket) when/as I need it.
It also seems that a Roth IRA and Traditional IRA come out to be the same due the fact that the tax multiplier is just multiplied through at a different point. i.e.
P * Tax * (Interest) ^ years = (P * (Interest) ^ years) * Tax
Thanks, forgive me if my terminology/understanding is incorrect.