Differences in Roth and Traditional IRAs

NOTE:  We are not IRA specialists.   Make your own decisions with the help of a trained lawyer or accountant.   These examples are for your information purposes only, and laws and rules change year to year.

One of the first decisions a person must make is what kind of IRA  to set up.   

TRADITIONAL IRA
The traditional IRA is popular because it allows you a tax deduction when you file your income taxes. The money you make on the investment is accumulated tax-free until you take a distribution.  Many believe this is ideal as we may have a lower tax bracket many times in our latter years. Money removed from the account after the age of 59 1/2 is taxed as current income.  Traditional IRAs are best suited for those expecting to be in a lower tax bracket when making withdrawals.   

ROTH IRA
The Roth IRA does not allow for any deduction from taxes, but its greatest attribute is that all money made is tax-free while being invested, and no taxes are due when you make a redemption.   My wife and I started with Traditional IRAs in our early years before the ROTH IRAs were created.   Seeing the great advantage of no taxes I converted our traditional IRAs into  ROTH IRAs and paid the taxes due on them ten years ago.   It was one of my better investment decisions.   After several years, we no longer will face taxing in our retirement years from our redemptions.   A Roth IRA allows you to make after-tax contributions with no income tax deduction.   If you expect to stay at or near your current income level during your retirement years, this is a great choice.   Contributions grow tax-free.

Almost anyone can open an account now as the over 21 years of age limitation has been removed.   

Current limits are:
Maximum Contributions for 2021 are $6,000 ($7,000 if over aged 50.)
​Some earned income is required to make IRA contributions.   Contact your lawyer or tax accountant for advice as what is the best plan for you and your family.
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