Investing in index funds through brokerage vs ROTH IRA vs IRA ??

[Vincent Sottile]

I have been investing in VTSAX through a joint brokerage account. I'm debating if I should start maxing out a ROTH IRA or regular IRA in addition. From what I understand you can withdraw from a ROTH at any time, so it could almost double as a savings account, instead of leaving money in the bank to collect little interest. Are there any advantages an IRA would have over a ROTH IRA, beside reducing taxable income? I know there are fees for withdrawing from an IRA early.

I am 23 years old, working full time. Thanks!

[Jacob Sampson]

I try to keep things simple. In my mind it comes down to what tax bracket you are currently in. To me if you are 15% or below then I would do a ROTH because I want to be paying taxes now. I am unlikely to ever be in a lower tax brack. If I am in the 20%ish range then it could be argued either way. Above the mid to high 20% I would go with a traditional IRA.

The ROTH giving you the ability to withdraw your basis at any point is a benefit but keep in mind these are intended to be retirement accounts, I don't necessarily want it to be easy to pull from my retirement account.

And finally, the advice I give above is where I would put the bulk of my money, in all cases I would probably fund both a ROTH and traditional so that in retirement I have some ability to control what tax bracket I fall into.  So If I were in the 10-15% bracket I might put 80% of my retirement money in a ROTH and 20% in a traditional.  That percentage would shift as I move up in brackets.

Just my thoughts as a non professional financial guy.