One of the most common questions for financial advisors is, whether or not you should choose a ROTH or a Traditional when it comes to either your IRA or 401k retirement account. In today’s episode, Brad breaks it all down! Watch Now!

BOOK YOUR RETIREMENT TRACK MEETING:
or call 805.410.5454

FOLLOW Brad on Social Media

Facebook:
Instagram:

Link to my New Book “Retire Right”

Music Track: License ID- P67643-145694…(read more)

LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

When it comes to retirement savings, there are two main types of accounts: ROTH and traditional. Both have their advantages and disadvantages, so it is important to understand the difference between them before choosing which one is best for you.

A traditional retirement account is funded with pre-tax income, which means that the amount you contribute is deducted from your income before taxes are calculated. This can provide a tax break now, as your taxable income is reduced. However, when you withdraw money in retirement, it is taxed as regular income. This means that you will be paying taxes on all of your contributions and any investment gains made. Additionally, traditional accounts have required minimum distributions (RMDs) that begin at age 72. These RMDs force you to take out a certain amount of money each year, which can increase your taxable income and potentially push you into a higher tax bracket.

On the other hand, a ROTH retirement account is funded with after-tax income. This means that you do not receive a tax break now, but when you withdraw money in retirement, it is tax-free. This includes both your contributions and any investment gains made. Additionally, ROTH accounts do not have RMDs during your lifetime. This means that you have more control over your money and can choose to withdraw it when it makes the most financial sense for you.

So, which one is better for you? It all depends on your current financial situation and your retirement goals. If you are currently in a high tax bracket and expect your tax rate to be lower in retirement, a traditional account may be a better option. This is because you will receive the tax break now when your tax rate is higher, and pay taxes later when your rate is lower. However, if you are currently in a low tax bracket and expect your tax rate to be higher in retirement, a ROTH account may be a better option. This is because you will be paying taxes now when your rate is lower, and avoid paying taxes later when your rate is higher.

It is also important to consider your overall retirement plan. If you plan on leaving a significant amount of money to your heirs, a ROTH account may be more beneficial. This is because your heirs will receive your account tax-free, while a traditional account would be subject to income tax. Additionally, if you have a pension or other sources of income in retirement, a ROTH account can provide tax diversification and help keep your overall tax rate lower.

In conclusion, both traditional and ROTH accounts have their advantages and disadvantages. It is important to understand the difference between them and choose the one that best fits your current and future financial situation. Consulting with a financial advisor can help you make the best decision for your individual needs.