2 questions

[Guest Ric310]

Hello,

i'm new to the forum and I have really appreciated the info given in the recent threads.

I just want to ask 2 questions because I am considering opening a Roth IRA.

1. I was under the impression that contribution to Roth IRAs are tax-deductible, but reading the instruction on my tax form it explicitely says that regular-IRA contributions are tax deductible and that ROTH IRA contributions are not! Can anyone clarify?

2. if I open it before april 15th, can i still deduct my contribution for 2004 taxes? if so, will the fund have enough time to send me the appropriate documentation to file with my taxes, or is it better not to rush it and open the IRA in 2005, or still open it but not deduct for 2004 taxes?

Thanks,

Ric

[david rigby]

See http://www.irs.gov/pub/irs-pdf/p590.pdf

Generally,

1. Contributions to a regular IRA are deductible, and amounts paid from the IRA are taxable;

2. Contributions to a Roth IRA are not deductible, but amounts paid from the Roth IRA are not taxable.

[QDROphile]

Contributions to a regular IRA are not always deductible. Read Publication 590 for details.

[John G]

Roths do not have any tax deduction.... but they provide many other plusses. These include: no mandated dates for distributions, no mandated distribution amount, no taxes in normal retirement, and you can tap the account in an emergency removing any contributions at any time for any reason (not recommended, but its part of your safety net).

Under most scenarios, the Roth beats the IRA, even if the IRA has a tax deduction. Unless you are taxed at an extremely high rate now, but expect much lower tax rates in the future - go Roth.

[Guest Ric310]

John, QDROphile and Pax,

thanks a lot for the explaination.

It seems much clearer now.

Ric