ROTH vs Traditional IRA

• You can access monies from both IRA's after the age of 59.5

• Withdrawing prior to 59.5 can be subject to a 10% penalty and additional income taxation 

• Selecting which IRA depends on whether you believe you will make more money now or in retirement (Either will be beneficial)

• You can set up your own ROTH or Traditional IRA by 

  • • Opening an account with a number of financial institutions like Vanguard, Charles Schaub, Invesco

    • Working with a financial advisor; though they may take out 1-3% of assets under management (AUM) annually

    • Through company programs for retirement 

ROTH IRA 

• Uses post tax dollars (from your bank account)

• After 59.5 distributions are 100% TAX FREE since you already paid taxes prior to investing

• ROTH IRA's can be beneficial if you believe you may be making more money in retirement (higher tax bracket)

• You may take out your contributions (e.g. $583.33/month, $7,000 annually) at any time TAX FREE. Since you already paid taxes, they will not be subject to taxation. or penalties

• However, taking out your contributions reduces your growth potential

• Income Limits

Traditional IRA

• Uses pretax dollars (directly from your paycheck)

• After 59.5 distributions are taxed based on your tax bracket (See Tax Brackets)

• Many people use this IRA thinking they will make less money in retirement and will fall in a lower tax bracket (lower taxes)

• Traditional IRA's may be 100% tax deductible (reduce your taxable income) 

  • • No Retirement Plan at Work

    • Retirement Plan at Work

• There are no income limits (switch over to a Traditional IRA if you exceed ROTH IRA limits)

• Benefits of using a Traditional IRA

  • • Using Pre-Tax dollars reduces your gross income and taxes on the money put into your IRA; you will pay taxes on the amount when you withdraw

    • Pre-Tax dollars are considerably less (15-20%) than Post-Tax dollars and allows you to keep more money now for month to month expenses. This amount may be negligible, but with the combined reduction of annual taxes and the potential that your tax bracket will be lower in retirement than your current tax bracket, you may save money.

Maxed Out on IRA's?

• You can set up your own personal investing accounts or invest your money with a broker

• If investing on your own, you can find similar investments that mimic typical IRA investments

• There is no minimum to what you can invest personally

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