Maybe you’ve heard differences between a Roth and traditional IRA in the past, but how do you determine if a Roth is right for you? What are the short-term vs. long-term benefits?
(Click the featured times below to jump forward in the episode)
The big difference between a traditional IRA and a Roth IRA relates to the taxes you pay. With a traditional IRA you get the tax deduction now on your investment, whereas with a Roth IRA, you do not get a tax deduction but the money comes out tax-free in retirement. Further, there are no required minimum distributions later on with a Roth IRA, unlike a traditional IRA.
But you might be wondering, why is it then that more people seem to have a traditional IRA? Often companies offer a payroll deduction at work toward a 401(k), putting your retirement savings on autopilot and maybe even with an employer match. Most companies do not offer a Roth 401(k). So, the decision on starting a Roth IRA falls on your shoulders. How do you know if it’s for you?
In this episode of Cover Your Assets KC, David walks us through what a Roth IRA is, why and how people use it, and who most benefits from it. It can be a complicated decision, so it’s important to understand the tax implications later. You may even want to consider doing a Roth conversion. Regardless, you have to have the proper strategy in place to make the best decision for your future.
Are you contributing to a Roth IRA now?
Listen to the full podcast or click on the timestamps below to get your questions answered about the Roth.
[0:33] – What’s the difference between a traditional IRA and a Roth IRA?
[2:11] – Why do so many people contribute more to traditional IRAs?
[3:14] – Why can a Roth be powerful for someone saving for retirement?
[4:45] – Who should contribute to a Roth instead of a traditional IRA?
[5:50] – Who should contribute to a traditional IRA?