Today's Hack

Are you investing in a traditional IRA or a Roth IRA? Which one is better? What pros and cons should you be aware about? Find out on this episode.

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Show Notes For This Episode

Today’s Hack:

Are you investing in a traditional IRA or a Roth IRA? Which one is better? What pros and cons should you be aware about? Find out on this episode.

Click the timestamps below to jump ahead in the episode…

Video Version:

Other Retirement Facts:

How do you know whether to invest in a traditional or Roth IRA? Does it make that much of a difference? On this episode of Phil’s Tax Hacks, we look at everything from where the traditional IRA came from to what kind of taxes to consider in the future.

The main difference comes down to, “pay me now or pay me later” when it comes to the taxes revolving around the different IRA options. You’ll have to pay taxes one way or another. Some find the tax deduction now more gratifying, which may be why traditional IRAs are commonly used.

What makes a Roth IRA so powerful? Is now a good time to make a Roth conversion? A Roth IRA provides tax-free money in the future because you’ve already paid the tax on the front end. Right now, we are in a low tax bracket, so that could mean it may increase in the future. You have to ask, does it make sense for you and your situation?

Understanding the benefits of a Roth IRA can weigh in on your decision. Talking with your advisor can help to look at your specific situation. Which one are you currently investing in?

Finally, Phil answers a question from the mailbag about leaving a large inheritance. Is that something to talk openly about ahead of time or something to leave as a surprise?

Listen to the full episode or click on the timestamps below to hear more about deciding between the traditional and Roth IRA.

0:30 – Phil is back in the office, by appointment only.

2:51 – What is the deal with the market?

4:13 – What is the difference between traditional vs. Roth IRAs?

5:17 – The traditional is what more people have used.

6:32 – Is taking the tax benefit now worthwhile?

7:16 – Is now a good time to do a Roth conversion?

9:05 – Is there a specific person that fits best in one vs. the other?

12:09 – Mailbag: Should we leave a surprise inheritance or tell them ahead of time?

A Quotable Moment:

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