Roth or Traditional? Why does it matter which one I choose, as long as I have an IRA…right? Wrong! There are benefits that both accounts have; benefits that can help you now or later during your retirement years.
How does your income stack up?
Your income can eliminate your from getting a Roth IRA, but a Traditional IRA doesn’t have income limits. If you make more than $100,000 (filing single) and $160,000 (filing married), then you will have to go with a Traditional IRA. Otherwise, you can choose to go with a Roth IRA.
Benefits of a Roth IRA
Those who qualify for a Roth IRA, should choose the Roth over the Traditional. Benefits of the Roth come later rather than sooner, helping you out more during your retirement years. Some of the benefits of the Roth include:
- Contributions are from post-taxed income. Since deposits come from income already taxed, withdrawals are not taxed during retirement.
If you need the money early, you can take it out without paying penalties or taxes, unlike the traditional. - $5,000 yearly contribution limits. $6,000 age 50 and over.
Benefits of a Traditional IRA
Traditional IRAs are not only for those who don’t meet the income requirements of the Roth. If you need more of your money now, choose the Traditional IRA as is lets you deduct taxed on your contributions. There are benefits to the Traditional IRA that many people make their decisions upon such as:
- Contributions can be deductible (depending on income level)
- Money grows tax deferred (taxes are paid at withdrawal)
- $5,000 yearly contribution limits. $6,000 age 50 and over
- Available to everyone.
4 Questions To Make The Decision For You.
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