Should monetary gifts always be invested in Roth IRAs rather than IRAs?

[RusticBohemian]

Since you don't have to pay tax on monetary gifts, does it make sense to stick them in a Roth IRA rather than an IRA, since you'd have to pay taxes on the IRA when you withdraw?

[frugalnacho]

money is fungible.  You could easily use the tax free gift money to pay your normal expenses, and use the money would would have otherwise used to pay your expenses to contribute to a traditional IRA.   The fact that you got a tax free gift is irrelevant.  You should evaluate your own situation and contribute to tIRA or roth based on that, not whether some portion was given tax free.

[maizefolk]

The same thing put another way:

Assuming you're not up against the caps in your total IRA contribution and someone hands you a check for $1000, you can either invest it in a Roth IRA, or contribute it to a traditional IRA and then also invest the increase in your tax refund from being able to deduct an extra $1,000 from your increased tIRA account.

So you can either have less money in your Roth IRA, but know you'll never have to pay taxes on it again, or more money in a traditional IRA, but know you'll have to pay taxes on it at some point. Which is the same trade off as any other money you contribute to an IRA account

So make whichever choice you'd make with your regular IRA investments, the fact that the money you're using comes from a gift doesn't change any of the tax or investment implications of which one makes sense in your particular circumstances.