Cheddar Stacker, I VERY much appreciate the help and advice.
Are we in a very special circle of knowledge then? Why wouldn't everyone follow this plan, furthermore, why wouldn't the government shut this strategy down?
There is a lot of collective knowledge on this forum, and yes I think it's a special place. This data is out there and available to everyone, but as apfroggy0408 pointed out people would prefer to just mindlessly consume. When you consume, you need money, and you can not imagine living within the 15% tax bracket so this strategy doesn't occur to most people.
Some people think the government will change tax laws to "shut this strategy down" as you put it. Some people also feel very strongly that eventually the government will look to Roth IRA's for more tax revenue in the future, meaning they might tax the money on the way in, and on the way out. Both strategies carry some risk of future law changes. What you know for certain is that you are paying 25% taxes on your last $ earned, and you can defer/avoid that tax now, so why wouldn't you?
The laws are always changing, but this is the current environment. I don't believe the intention of the laws was to allow frugal early retirees to pay no income tax. I believe it was to not punish (rather to encourage) the middle class for investing. That doesn't mean you shouldn't use the current laws to your advantage if you know how and can accomplish it.
Again, not challenging the knowledge of this forum, I just have a strong skeptic side that makes me ask these questions to feel comfortable. :/
Please challenge. Please question. This is how we all learn.
I like a Roth simply because it has the same contribution limit but is post tax. You can essentially invest a higher percentage of your income in one before hitting the limit.
I love Roth's as well. They have their place, so don't take this post as an anti-Roth rant because it's not. They are great for some people, but if you are paying more than 15% tax right now you might want to re-think this.
Also, I understand what you are saying skunkfunk, but it's really 6 of one and half a dozen of the other. If you put $17,500 in a Roth in the 25% tax bracket you have to pay $4,375 in taxes as well, so you are $21,875 out of pocket. If you put $17,500 in traditional you will have an extra $4,375 to invest in post tax funds. Barring a major change in your tax bracket there is really no difference at the end of your accumulated savings.
You can't control the current or future tax rates, but you can legally manipulate your taxable income while you work, and after you retire. Both of those factors allow you to effectively reduce your tax rate now and control it in the future, and you will likely end up better off with Traditional rather than Roth if you play the game properly.
If you don't trust me search the forum for this topic. This has been discussed endlessly here, and someone else might have explained it better than I just tried to.