Roth Vs. Traditional IRA for a RE Investor (Passive Income)

[Jason Hawrylo]

While currently having a post tax Roth IRA and Pre Tax 403(b), I've always been more keen on the Roth and contribute more to my Roth (a lot more). But, the more I'm learning about taxes and brackets in retirement the more I start to wonder if Roth is the way to go. As a Real Estate Investor, I anticipate a large chunk of my retirement will be funded by income from rental properties. The IRS sees this as passive income right? So wouldn't my earned income be quite low if it's just a social security and pension check each month? Does the IRS view SS and Pension payments as earned income that is taxable?

I'm in a pretty low bracket right now so I'm too concerned, but I am SUPER interested in what folks on the forums hve to say!  

Thanks for any input! 

[Christian Stoecklein]

@Jason Hawrylo it sounds like your question is a general question about if it's better to do pre tax contribution (employor sponsored or IRA) or a post tax Roth.

That depends on your tax rate now and when you would take withdrawals. Also keep in mind the distributions from your traditional IRA is usually ordinary income and doesnt give you the lower long term capital gains if you held it outside of a tax sheltered account.

In general i prefer the Roth if your income tax bracket is low now. You are hedging rising income tax rates and the opportunity cost of the immediate benefit of the pretax contribution isn't that significant.

Christian