Hi, some years I contribute to my Roth IRA and some years I contribute to my Traditional IRA. Do you have any advice on how to optimize my contributions and future use of these two retirement accounts.
You'll need to sign in or create an account to connect with an expert.
Hello pablosatz,
Main difference between Traditional and ROTH IRA is when you pay taxes. With Trad. IRA, you put pre tax money and you pay taxes when you withdraw money when you retire. Taxes you pay will depend on your overall income. With ROTH, you do not get tax benefits now but money grows tax free over the years and you do not pay taxes when you withdraw money. Also as of now, ROTH accounts are not subject to RMD rules.
They both have their pros and cons and which one is better depends on your situation. People with high tax rate might get good benefit by contribution to IRA. Lower Tax rate is generally good for ROTH since tax benefit now outweigh the future tax benefits. See below link for more info. on ROTH vs. Traditional IRA.
Thanks for participating in TurboTax's Ask the Expert event today. I hope this information was helpful!
Traditional IRA and Roth IRA both have different possible tax implications.
For a traditional IRA it can possibly lower your taxable income based on if you're covered with a retirement plan at work and on your income level. So the traditional IRA can beneficial now for paying less taxes. However, you will be required to take a required minimum distributions once at a certain age. Right now the RMD (required minimum distribution) age is 73.
All Roth IRA contributions aren't tax deductible. So they won't lower your taxable income. However, they're still beneficial because you pay for the taxes up front and don't have to pay taxes again. You can also keep the funds in your account for as long as you wish. There are rules for a Roth IRA distribution to avoid a penalty such as being over 59 1/2 and holding the account for more than 5 years. There are more exceptions to the distribution rule such as using the Roth IRA funds for higher education and your first home buyer purchase (up to $10,000).
Still have questions?
Make a postAsk questions and learn more about your taxes and finances.
thegoodreturn
Returning Member
Alex3
Level 2
wid932ddf
New Member
Romper
Level 5
wchowe
Level 2
Did the information on this page answer your question?
You have clicked a link to a site outside of the TurboTax Community. By clicking "Continue", you will leave the Community and be taken to that site instead.