Good evening Dear Reader (or morning as the case may be where you are!),
The Mad FIentist (whom I greatly admire) does an excellent write-up in this post ( https://www.madfientist.com/how-to-access-retirement-funds-early/ ) detailed exactly why you should invest in a Traditional IRA rather than a Roth IRA.
Alas, this post was not written back when I opened my Roth IRA (I would hazard a guess that was in 2005 or 2006), nor was I aware of FIRE back then.
As such, I have constantly been asking myself. Do I continue investing in my Roth IRA or should I begin a Traditional IRA (better late than never, am I right)?
After considering this for about a year, and (finally!) this year I think I am eligible for a Traditional IRA, I sat down and did some simple math using this online calculator: https://www.nerdwallet.com/banking/calculator/compound-interest-calculator .
And, here is a table with the results:
| Vehicle | Current Investment | Additional Investment | Growth after 8 years | Growth after 20 years |
| Roth IRA (TD) | 50548.05 | 0 | 69611 | 112492 |
| Trad IRA (Schwab) | 0 | 6000 | 8263 | 13353 |
I note the different brokerages because were I to open a Traditional IRA, I would open it with Schwab as I primarily invest in SWPPX currently. Therefore, the amount in the Roth has $16.95x4 subtracted from the maximum I can contribute in 2021 ($6000). This is assuming I would split the $6000 up into 4 equal payments to invest in the stock market at intervals as regular as I can make them to take advantage of dollar cost averaging. Of course, I might just dump the whole amount in at one time depending on how the stock market is doing at that time.
Well, my inkling that adding $5932.2 to my existing amount in SWPPX would compound in interest resulting in much larger gains than starting from scratch this year proved correct. I would have a whopping $19,000+ increase than if I opened a traditional IRA.
I checked growth after 8 years and after 20 years since it isn't clear yet if we'll retire in 8 or 20 years. As I've mentioned previously, if I retire in 20 years, I'll be able to take advantage of special gap medical insurance for my husband and myself.
These numbers don't include any additional investments past this year (2021) since I wasn't sure how many more years I'd qualify to deposit in the Traditional IRA (another reason why putting the money in the Roth might make more sense).
So as another pair of bloggers I admire say, math'ing shit up works every time (Millennial Revolution! You should check out their blog too, you may enjoy it - if you don't subscribe to them already :) ).
UPDATE: Jan 17, 2021, 8:20 PM EST.
Well, this is embarrassing. I went through the scenario above with a good friend and they explained the growth would be the same no matter what I invested in.
Actually, the money in the traditional grows a little more due to the fact that you aren't paying fees if I open a traditional with Schwab.
See the new calculations below:
| Vehicle | Current Investment | Additional Investment | Growth after 8 years | Growth after 20 years |
| Roth IRA (TD) | 50548.05 | 0 | 69611 | 112492 |
| Trad IRA (Schwab) | 0 | 6000 | 8263 | 13353 |
| Roth IRA (no additional contributions) | 44615.85 | 0 | 61440 | 99289 |
| Sum of Trad IRA + Roth IRA (no additional) | 44615.85 | 6000 | 69703 | 112642 |
So, looks like I'll be opening a traditional in 2021! It would also be good to note that it will be more of a hassle if I do traditional then a Roth conversion ladder, but even if I decide not to do a conversion ladder, per the MadFIentist, you will get more money in the long run even if you decide to do the penalty.
Well. Even the best of us can make mistakes.
I wish you a very pleasant evening,
Into the FIRE
