[jIM_Ohio]

You need to make sure you know what you are talking (asking) about. I understood about 75% of your post.

I did not fully understand the question. Also know that tax planning is not easy. You can either take general advice (consensus here will tell you to use the Roth) or think, plan and see if the Roth will really save you money.

So I will back up. What tax bracket are you in now (15%, 25% or 28%). Use the taxable income on your 2007 tax return to calculate this.

If in 15% tax bracket (65100 married filing jointly or 32550 single) then I would suggest using Roth.

If in 25% tax bracket (less than ~131k mfj or ~78k single) either/or

If in 28% tax bracket or higher (more than more than 78k single or 131k mfj) use the deducatable IRA.

The way deductions work is the higher the tax bracket, the higher the deduction.

If you contribute 5k to a traditional DEDUCTABLE IRA, you will get the following back:

15% bracket is $750
25% bracket is $1250
28% bracket is $1400

In all cases you must read IRS pub 590 to make sure you qualify for the deduction. The same $5000 was contributed in all cases.

Then as you pointed out, if you think tax brackets will go up in future for you- for example if your taxable income is 77k now as a single person, you know that future income will be taxed at 28% and not 25%, then the Roth makes sense MAYBE. If you are single and making just under 32k taxable income (15% bracket) and you know raises will be pushing you to 25% tax bracket the Roth makes more sense than previous case PROBABLY.

Here is my logic:
Do EVERYTHING you can to stay in 15% tax bracket. Meaning if in 25% bracket, use the deductable IRA and see if deductions move you into 15% bracket. Then once in 15% bracket, cap out the bracket income by converting a traditional IRA to a Roth IRA, but only convert up to top of 15% tax bracket.

75% of this country earns in 15% tax bracket. If you are one of the other 25%, My suggestion would be to take the deduction NOW and worry about taxes LATER. If you are in the 75% which earns in the 15% tax bracket, the Roth makes great sense.

If in 25% bracket (the bracket between 15% and 28%) you need to decide if you are likely to see income move down to 15% or up to 28%.

If income is moving down- take the deduction NOW.
If income is moving up, consider the deduction and consider the Roth. I would lean towards Roth based on withdraw rules.

There are two types of traditional IRAs- a deductable IRA and a non deductable IRA. You fund both with money in your checking account. The deductable IRA will get you money back when you file your tax return. The non deductable IRA will grow tax free. Both types are subject to RMDs at age 70.5. The Roth is NOT subject to RMDs at age 70.5.