|
Submitted by: Daniel Chen
Dan currently provides Wealth Management services in the areas of Estate Planning, Risk Management, Tax Efficient Strategies and Investment Management through an institutional investment consulting process. His twenty years as a trader in the institutional U.S. Treasury markets for firms such as Garban LLC. and Cantor Fitzgerald has provided him with immense and diverse insight of the capital markets.
Roth vs the Traditional IRA
According to the guidelines, your eligible for a Traditional IRA and a ROTH IRA. Which one should you choose?
If you do not need the tax break today, then choose the ROTH IRA. It has greater flexibility because:
1] It allows you to withdraw your contributions at any time, given certain exceptions, penalty and tax free.
2] There is no mandatory distribution at age 70 ½.
Choose the Traditional IRA if you need the tax break today and you expect to be in a lower tax bracket during retirement.
Please note that there is also a traditional nondeductible IRA, but you won’t get the tax benefits that would be available with Roth or traditional tax-deductible IRA. However, if your income, according to the tax tables , prohibit you from contributing to the other IRA’s, a traditional non-deductible IRA is still attractive because of the tax deferred growth.
No matter how you qualify, opening these tax deferred accounts will give you the power of compounded growth.
> Return to Financial Strategies |
Authored by the
founder of the
PaladinRegistry