Permalink Submitted by Alan Spross on Thu, 2009-08-13 21:28
The decision of which type is best depends on many factors, and the house purchase is not among the major factors. With a traditional IRA, a distribution for a qualified first home purchase is taxable, but the penalty is waived up to 10,000 lifetime. With a Roth IRA, the distribution would also avoid any penalty in the event it came from earnings up to 10,000.
Therefore, it would be best to make the decision based on whehter you feel your tax rate this year is equal or lower than what it will be in retirement. If so, generally you would favor the Roth. But if you feel your rate will be lower in retirement, then the traditional IRA is best. However, if your current income is TOO HIGH to get a deduction for your traditional IRA contribution, then a Roth is always better.
Permalink Submitted by Alan Spross on Thu, 2009-08-13 21:28
The decision of which type is best depends on many factors, and the house purchase is not among the major factors. With a traditional IRA, a distribution for a qualified first home purchase is taxable, but the penalty is waived up to 10,000 lifetime. With a Roth IRA, the distribution would also avoid any penalty in the event it came from earnings up to 10,000.
Therefore, it would be best to make the decision based on whehter you feel your tax rate this year is equal or lower than what it will be in retirement. If so, generally you would favor the Roth. But if you feel your rate will be lower in retirement, then the traditional IRA is best. However, if your current income is TOO HIGH to get a deduction for your traditional IRA contribution, then a Roth is always better.