Slide 1: Title Slide - IRAs: Taking Control of Your Retirement Savings (Traditional vs. Roth)

In this session, we're going to talk about something very important for your future financial well-being: Individual Retirement Arrangements, or IRAs. There are two main types you need to know about: Traditional and Roth IRAs. Think of these as powerful tools that put you in the driver's seat when it comes to saving for your awesome future. Let's get started!

Slide 2: Traditional IRA: Tax Break Now

Let's start with the Traditional IRA. One of its key features is the potential for a tax break right now, in the year you make the contribution. When you contribute to a Traditional IRA, that money is usually tax-deductible. Think of it this way: if you contribute $1,000, it could lower your taxable income this year, meaning you could pay less in taxes. The money then grows over time, and you don't pay taxes on those earnings until you take the money out in retirement. However, when you do withdraw that money in retirement, it's taxed as ordinary income, just like the money you earn from a job."

Slide 3: Traditional IRA: Key Points

Traditional IRA have limits on how much you can contribute each year – we'll see those numbers later. It's also important to know that if you take money out before age 59 and a half, you'll usually face penalties and taxes, although there are some exceptions for specific situations. Finally, once you reach a certain age in retirement, the government requires you to start taking withdrawals, these are called Required Minimum Distributions, or RMDs.

Slide 4: Roth IRA: Tax-Free in Retirement

Now, let's talk about the Roth IRA. The big difference here is when the taxes happen. With a Roth, you contribute money that you've already paid taxes on – this is called 'after-tax' money. So, no tax break in the current year. However, the really exciting part is that your money then grows completely tax-free, and if you make 'qualified withdrawals' in retirement, those withdrawals are also completely tax-free! That means you don't owe the government any taxes on that income in your retirement years.

Slide 5: Roth IRA: Key Points

Key things to remember about Roth IRAs: just like Traditional IRAs, there are annual contribution limits, and these limits are combined if you contribute to both. There are also income limits to be able to contribute directly to a Roth IRA – if you earn too much, you might not be eligible. A great feature of Roth IRAs is that you can always withdraw the contributions you've made at any time, tax-free and penalty-free. However, withdrawing earnings before retirement has rules. Also, unlike Traditional IRAs, you are not required to take distributions (RMD) from a Roth IRA during your lifetime."

Slide 6: Traditional vs. Roth: Which is Right for You? (Tax Brackets)

How do you decide which one might be right for you? A big factor to consider is your current tax bracket compared to what you expect your tax bracket to be in retirement. If you think you're in a lower tax bracket now, like many of you might be early in your careers, a Roth IRA could be a great choice. You pay the taxes now at a lower rate, and then enjoy tax-free income in retirement when your income (and potentially your tax bracket) might be higher. On the other hand, if you're in a higher tax bracket now and expect to be in a lower one in retirement, a Traditional IRA might be more appealing because you get the tax break now when it's more valuable."

Slide 7: Why Roth IRAs Often Make Sense for Young Adults

For many young adults, Roth IRAs often make a lot of sense. You're likely in a lower tax bracket early in your career. Plus, the earlier you start, the more time your money has to grow tax-free! That compounding effect over many years can be huge. And, as we mentioned, the ability to withdraw your contributions if you absolutely need to (though your emergency fund should always be your first line of defense!) offers some flexibility.

Slide 8: Contribution Limits & Roth IRA Income Limits [Current Year]

Let's talk about the numbers. For 2025, the total amount you can contribute to all of your IRAs – both Traditional and Roth combined – is $7,000 for under age 50. Keep in mind this limit can change each year due to inflation, so it's good to stay informed. For Roth IRAs, there are also income limits. For 2025 for single individuals if your Modified Adjusted Gross Income (MAGI) is above $150,000 your contribution amount will be limited. For married couples filing joint returns if the MAGI is above $236,000 your contribution amount will be limited. After you go over the upper limit you will not be able to a Roth IRA. Again, these income limits can change annually.

Slide 9: Qualified Roth Withdrawals Explained

So, what makes a Roth IRA withdrawal 'qualified' and therefore tax-free and penalty-free in retirement? You will need to meet two conditions: first, the account must have been open for at least five years. This five-year rule starts when you make your first Roth IRA contribution. Second, you need to be age 59 and a half or older. There are some exceptions to the age rule, such as for disability, using up to $10,000 for a first-time home purchase, or for qualified education expenses (though taxes may still apply).

Slide 10: Wrap-up

Let's wrap things up. Remember the main difference: Traditional IRAs can give you a tax break now, while Roth IRAs offer the potential for tax-free income in retirement. For many of you young adults, the Roth IRA can be a really powerful tool to build your future wealth because you're likely in a lower tax bracket now and have a long time for those tax-free earnings to compound. So, think about your current financial situation and your future goals. Does a Traditional or a Roth IRA sound like a better fit for you? Most likely, for many of you, exploring opening a Roth IRA account could be a fantastic first step towards taking control of your retirement savings and building the secure future you deserve.

Click on the link below to open the online quiz.  The quiz will open in a new tab.

Note: To receive your "Badge of Completion" you will need include the your name, email and score 100% on the quiz. You can take the quiz more than once.  Your highest score will be used.

Link to online quiz  (opens in new tab)