What type of IRA is best for you?


So you’re ready to open an individual retirement account, but you’re not quite sure what’s going to work for your situation. Don’t worry. Here’s a quick overview to help you decide.

The IRA differences

IRAs generally fit into two categories: traditional IRAs and Roth IRAs. Both have an annual contribution limit. For 2018, the limit is the lesser of your taxable income or a set amount of $5,500 when you are under age 50 and $6,500 when you’re age 50 or over.

• Traditional IRA: With a traditional IRA, your contribution is typically deductible on your current tax return. You get upfront savings.

In addition, you don’t have to pay income tax on earnings in your account until you start taking withdrawals. You can benefit from this tax deferral until you reach age 70½. At that point, you’ll have to start withdrawing money from your account or pay a penalty.

• Roth IRA: When you contribute to a Roth, no deduction is available. However, withdrawals of contributions and earnings are tax-free. You get to decide when — or if — you’ll take withdrawals. You’re not penalized for leaving the money in your account no matter your age. Contributions can be withdrawn at any time, and earnings can be withdrawn penalty free after age 59½.

Additional factors to consider include other sources of retirement income and your expected tax rate.

Contact us if you would like more information on whether a traditional IRA or Roth IRA is best for you.

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