Roth IRA vs Traditional IRA: Which is Right for You?
July 28, 2023

Deciding on the right retirement investment can be a challenge. Two popular options are the Roth IRA and the Traditional IRA. Both offer unique benefits, but the best choice for you depends on your individual circumstances and financial goals. Let's explore the critical differences between these two types of Individual Retirement Accounts.


A Traditional IRA can provide immediate tax benefits. Contributions are made pre-tax, which means they can reduce your taxable income for the year you contribute. The money in your account then grows tax-deferred, meaning you won't pay taxes on your investment earnings until you make withdrawals during retirement.


On the flip side, Roth IRA contributions are made with after-tax dollars. This means you don't get an upfront tax deduction, but your money grows tax-free, and qualified withdrawals during retirement are also tax-free. This can be beneficial if you expect to be in a higher tax bracket in retirement than you are now.


The choice between a Roth IRA and a Traditional IRA often comes down to your current tax rate versus what you expect it to be in retirement. If you believe your tax rate will be higher when you retire, a Roth IRA may be the better choice. If you think it will be lower, a Traditional IRA could be more beneficial.


Another key difference is the withdrawal rules. Traditional IRAs require you to start taking minimum distributions at age 72, even if you don't need the money. However, Roth IRAs do not have this requirement, allowing your money to continue to grow tax-free as long as you live.


In conclusion, both Traditional and Roth IRAs have their advantages and potential drawbacks. Your choice should align with your tax situation, retirement goals, and financial plan.


At RetireBetter, we understand that retirement planning is not a one-size-fits-all process. We offer a range of IRA products and expert guidance to help you make the best decision for your future. Together, we can build a retirement plan that suits your needs and helps you retire better.