Is a Roth IRA the Right Choice for You?

A Roth IRA is a special type of retirement account where you pay taxes on what you contribute to the account, and then all future withdrawals are tax-free. Investment advisors usually tell their clients that a Roth IRA is designed to benefit younger people — but a Roth IRA can be a good choice for people of all ages. Consider the following to see whether a Roth IRA is right for you.

If you want to take distributions tax-free during retirement, a Roth IRA is the right choice for you. If you’re eligible to open a Roth IRA, you’ll be able to make contributions to your account, get taxed now for those contributions, and then withdraw your funds without paying taxes on that money when you need it in retirement. A traditional IRA gives you the ability to deduct the interest on your taxes now, but you’ll pay taxes on your withdrawals later.

If you expect that your tax rate is going to be the same or higher than it is now, a Roth IRA is probably a stronger choice for you. A traditional IRA is a better option if you expect your tax rate to be lower in retirement because you’ll be able to take a tax deduction when it benefits you most. With either choice, your earnings in an IRA grow tax-free.

If you want flexibility in contributing to your IRA and taking distributions, you’ll likely choose a Roth IRA. Once you turn 70-1/2 years old, you must stop contributing to a traditional IRA and are forced to take distributions and begin paying taxes on your money. On the other hand, a Roth IRA has no required minimum distributions. Plus, if you’re still working after you’re 70-1/2, you may contribute to your account (as long as you stay within the income limits of the account).

To learn more about Roth IRAs or to speak with a financial advisor, click here, or give us a call at 281-487-9333.

Information is for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author.

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