Which is the right type of IRA to contribute to: “ROTH” or “traditional”?
A Roth IRA requires you to pay taxes on contributions upfront, but withdrawals, including earnings, are tax-free in retirement.
In contrast, a traditional IRA offers tax deductions on contributions, but withdrawals are taxed as ordinary income.
Roth IRAs have no age limit for contributions and allow penalty-free withdrawals of contributions at any time, while traditional IRAs have mandatory withdrawals starting at age 72 and early withdrawal penalties before age 59 ½.

Each person’s financial plan is a complex combination of many variables but generally speaking you may benefit more from a “ROTH” IRA contribution if you are currently in a lower tax bracket and relatively young; because you may not need the current tax write-off as much and have a long time horizon for the funds to grow and be withdrawn tax-free.
If you are relatively older and higher-income, you may benefit more from a traditional IRA contribution because you may need the tax benefit now.

Disclaimer: The information discussed should not be construed as tax, legal or investment advice. It is for informational purposes only and should not be taken as a recommendation or solicitation. Prior to making any financial decision individuals should seek advice from personal financial, legal, tax and other professional professionals. Investment products are offered through Aegis Capital Corp, a member of FINRA and SIPC. Investment products are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.

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When it comes to saving for retirement, one of the biggest decisions you’ll have to make is whether to invest in a Roth IRA or a traditional IRA. Both types of individual retirement accounts have their pros and cons, and the better option for you will depend on your individual financial situation. Let’s take a closer look at the differences between the two to help you make an informed decision.

A traditional IRA allows you to contribute pre-tax dollars, which means your contributions are tax-deductible for the year you make them. However, you’ll have to pay taxes on your withdrawals in retirement. On the other hand, a Roth IRA allows you to contribute after-tax dollars, meaning you won’t get a tax break on your contributions now, but your withdrawals in retirement will be tax-free.

One of the biggest advantages of a traditional IRA is that it can lower your taxable income during your working years, potentially putting you in a lower tax bracket and reducing your overall tax bill. This can be especially beneficial if you expect to be in a lower tax bracket in retirement. Additionally, if you think your tax rate will be lower in retirement, a traditional IRA may be the better option for you.

Conversely, a Roth IRA offers tax-free withdrawals in retirement, which can be incredibly advantageous if you expect to be in a higher tax bracket in retirement. Additionally, a Roth IRA gives you more flexibility when it comes to withdrawals, as you’re not required to start taking distributions at a certain age like you are with a traditional IRA.

Another important factor to consider is your eligibility to contribute to either type of IRA. While anyone with earned income can contribute to a traditional IRA, there are income limits for contributing to a Roth IRA. If you make too much money, you may not be able to contribute directly to a Roth IRA or you may only be able to contribute a reduced amount.

Ultimately, the decision between a Roth IRA and a traditional IRA will depend on your individual financial situation, including your current tax bracket, your expected tax bracket in retirement, and your eligibility to contribute to a Roth IRA. It’s important to carefully consider your options and possibly even consult with a financial advisor to ensure you’re making the best decision for your retirement savings.

In conclusion, both Roth IRAs and traditional IRAs have their advantages and disadvantages. The better option for you will depend on your individual financial situation and goals for retirement. Take the time to carefully consider your options and choose the account that best suits your needs. Regardless of which you choose, the most important thing is to start saving for retirement as early as possible to ensure a secure financial future.