How to Listen to Today’s Episode
Topics Discussed: Traditional IRA vs Roth IRA
In this episode we tackle the persistent, and sometimes heated, debate about which retirement account is better: Traditional IRA vs Roth IRA. Topics we cover include:
- The main differences between Roth IRA accounts and Traditional IRA accounts
- The main differences between Roth 401k accounts and Traditional 401k accounts
- Which one might be better than the other when saving for retirement?
- What other factors come in to play that would lead a person to choose one over the other if retirement savings is the goal?
- Which one do we often prefer when planning for retirement?
Episode Summary: Traditional IRA vs Roth IRA
When saving for retirement, we use qualified retirement accounts, as opposed to regular brokerage accounts. The reason for this is that qualified accounts grow tax-deferred. This means that you don’t pay taxes on your investment gains until a later time, presumably at retirement, when you begin to take money outof the accounts.
We talk about why it may make the most sense to put half in traditional accounts and half in Roth accounts. By doing this, you are diversifying your tax liabilities both now and in the future.
Resources
Estimating what it costs to retire comfortably in every state
401(k) Contribution Limit Increases in 2020
Traditional 401(k) vs Roth 401(k)
How a partial Roth conversion can lower your taxes
