Whether to invest into an ordinary tax-advantaged employer plan and IRA personal accounts versus contributing to Roth tax-advantaged employer plan and IRA personal accounts is sometimes a confusing decision.

The choice on the alternatives is one of the most complex decisions of lifetime personal financial planning. Many personal finance issues can influence whether a regular IRA or tax-advantaged employer plan personal account contribution versus a Roth tax-advantaged employer plan or IRA account contribution decision would be best.

If analyzed properly, the majority of people would find that making investments into a regular tax-advantaged employer plan or IRA personal accounts is the best decision, when those deposits would be currently tax deductible.

The trade-offs are complex. Simple retirement planning spreadsheets cannot model all the critical tradeoffs. the choice is not only about whether tax rates might be higher or lower. Instead, the preference requires a fully personalized personal finance projection and analysis of an investor’s lifetime savings, taxes, and assets.

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Whether or not a person will save enough and invest carefully across their lives is most important in the Roth retirement plan versus the “currently tax deductible” traditional retirement account contribution choice.

If a family does not earn a sufficiently high income, cannot save aggressively, does not dramatically reduce investment expenses, and/or does not grow a large enough portfolio of assets, then that investor will not have to worry about being in the upper tax brackets in retirement — regardless of whether state and federal income tax brackets have moved up or down by retirement. If an investor does not have substantial enough assets and income when retired, then the present tax savings an investor will get from choosing a regular retirement account additional investment will tend to be much more economically advantageous over a lifetime.

Note: this article ONLY talks about financial situations where somebody has the choice of making a “deductible against current income taxes” ordinary IRA or 401k additional investment versus a currently “not deductible against current income taxes” Roth IRA or 401k additional investment. when you can’t take a deduction this year but have available a Roth deposit, then the Roth contribution is better.

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Calculating your Roth account