Traditional vs. Roth IRAs and taxes

When it comes to IRAs and tax planning, talk with your financial professional about whether a Traditional IRA or a Roth IRA may be better for your tax situation and long-term financial goals.

With a Traditional IRA, the money you contribute gives you an up-front tax deduction, deferring your taxes when you withdraw money in retirement (when, theoretically, your taxes would be lower anyway.)

A Roth IRA contribution doesn’t provide a tax benefit now, but your qualified distributions when you take them later are tax-free.

There are details and considerations that will impact your financial plan with either choice, so talk with your financial professional about your next steps.

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Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.