Brent discusses the differences between Traditional IRAs and Roth IRAs, and considerations for each.
Many clients, and my family and friends, always ask me, “Brent, what’s a better option for saving: a traditional IRA or a Roth IRA?” Well there are many different factors that you may want to consider when pursuing these options. For a Traditional IRA, these are contributions that will be pre-taxed meaning in retirement when you take that money out you will be taxed on it. But also in retirement you will be required to take required minimum distributions when you turn age 72 (age 70.5 if you turned 70.5 before January 1, 2020). You may be thinking, “Brent, is this right for me?” Well, this may be right for an individual that believes they will be in a lower tax bracket upon retirement. This may also be right for an individual that has less time to save until retirement. Now on the other side of things, with a Roth IRA, these are after tax contributions meaning they grow tax-deferred and in retirement upon withdrawal you can take the amount tax-free. The other bonus with a Roth IRA is that there a no required minimum distributions as with traditional IRAs. The ideal person for this scenario would be a person that believes they will be in a higher tax bracket upon retirement, as well as a younger individual that has a longer time to save until retirement. Regardless of your decision, we applaud you for saving. As with all financial decisions, you should seek professional advice.
**Please note, as of 2019 Required minimum Distributions start when you turn age 72 (age 70.5 if you turned 70.5 before January 1, 2020).**