But wait. If I take pretax $1000 this year and put it in a Trad IRA and buy some stock, and in 20 years I retire and it’s worth $3000, then I should owe income tax on the $1000 and 15% capital gains on the $2000 gain. If I did the same to a Roth though, I’d pay tax on the $1000 now, so, it’s now $600, but in 20 years it’s $1800, and all of it tax free. (Forgive me if I’ve screwed that up) if I’m right then it kinda seems to depend not only on future tax rates (def a huge question mark) but also on how much the stock may appreciate, as if the stock has more than that modest appreciation the capital gains tax avoided could be huge.

I’m not claiming expert status so I’m happy to be set straight.

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raw_anon_1111 3 days ago | parent | next [-]

You wouldn’t pay tax on the $1000 you put in a traditional IRA. It would be pretax.

	▲	groundzeros2015 2 days ago \| parent [-]
		Traditional IRA pretax deduction phases out with higher incomes. Backdoor roth does not

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aobdev 3 days ago | parent | prev [-]

Sorry but you don't get to claim capital gains on retirement distributions, they are entirely taxed as ordinary income. If your tax rate later will be 40%, you get the exact same result: 3000-1200=1800.

If your tax rate will be lower in retirement, favor pre-tax contributions. If higher, favor after-tax. The trick is knowing what tax rates will be years (decades?) from now.