Fund a Roth? … Versus Deductible IRA … Might be surprised!

Knee deep in the middle of tax season we are reminded of the puzzling Roth. First rolled out as the best thing since sliced bread, after careful review … maybe not!

The Main Reason to fund a Roth

If you believe your taxes will be higher in retirement than now, you are a strong candidate for a Roth. Our experiences, and the vast studies show lower effective tax rates after retirement than while working. See below, but all other items being equal, deductions now are better. Roth V IRA

Roth V Deductible IRA

A Roth is the opposite of a regular deducible IRA. A Roth is funded with after tax dollar and grows tax deferred. Distributions are made at retirement without taxes. An IRA is funded with pre-tax dollars, grows tax deferred and is taxable upon distribution.

We will spare you the calculations, but if your tax rates are exactly the same in pre and post retirement, a Roth and an IRA have exactly the same end result!

In closing, if you can do both, certainly do so, but if it is either or, in most cases a deductible IRA is better.

Lastly be sure you qualify for any of these as the rules have changed and continue, via income and other plan participation.

Have an Awesome Day!

John A. Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225

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