I already have an IRA. Should I look into a Roth IRA as well.

Asked by Kathleen

6 Answers

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Answered by Dan Crimmins, Financial Adviser in Woodcliff Lake, NJ
Kathleen - It is great that you are saving for your retirement. The difference between a Roth IRA and a traditional IRA is when the tax is due. When you contributed to your current traditional IRA, you received a tax deduction. If you contribute to a Roth IRA, you will not receive a tax deduction at the time of the contribution, but when you withdrawal the money in retirement, you will not pay taxes at that time.
So your question requires an answer to the following question: Will your tax rate be the same or higher when you retire? If the answer is yes, then a Roth IRA makes sense. I suggest that you will not know the answer to that question so I generally favor contributing to the traditional IRA. This guidance follows the old adage of waiting to paying taxes as long as possible.
The amount that you can contribute to either the Roth or traditional IRA for 2013 is $5,500 (or $6,500 if you are over 50 years old) as long as you have taxable compensation in that amount or more for the year. Warning: that is the combined amount for the year, even if you contribute to both type of accounts. I hope that helps. | 08.28.13 @ 22:37
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
Answered by Arin Moradian, Financial Adviser in Glendale, CA
Roth IRA is a great way to diversify investment for retirement:
It's a nice nest egg you can built that later on can access without taxes. Its tax deferred and tax free,
The question is do you want to get tax deferred money and then pay taxes when it grows (IRA) or pay the tax now and let it grow and take out tax free. | 03.04.15 @ 00:17
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
Answered by Michael Keeler, CFP®, CLTC in Las Vegas, NV
This is a tough question to answer without knowing things like age, how much you have invested in your IRA, when you will retire, etc.
Younger people should usually do a Roth. The tax free growth will be a huge benefit over the years. For people approaching retirement, the advantage isn't as great.
Having both a traditional IRA and Roth IRA can be very handy in retirement. Many people will use the traditional IRA for income. Then the Roth can be used when you need a lump sum to pay for something not in your budget. Maybe a cruise, new car, or to replace that air conditioner. | 03.05.15 @ 23:56
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
Answered by Gregg Himfar, Financial Adviser in Carlsbad, CA
At the end of the year, do you owe the IRS? If the answer is yes, the traditional IRA is best. If the answer is no, then go with the Roth IRA. Contributions to each are dependent upon income, filing status, and any coverage through a group retirement plan. If you are doing your taxes and you find that you have extra deductions that you cant use, convert part or all of your current traditional IRA to a Roth IRA. | 08.15.15 @ 20:55
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hi Kathleen.

With a ROTH you do not get the tax deduction. With a traditional IRA, taxes are paid when you take the funds out.

Here is the rest of the debate:
What will your future tax rate be when you are eligible to draw down the funds?
If your future tax rate is lower, the traditional IRA is an advantage
If your future tax rate is higher, the ROTH IRA is an advantage
If your future tax rate is the same, no advantage

We love the self-directed IRA's (your choice of which). They offer a greater ROI. You may be better off combining all your IRA's into one self-directed due to fees. Keep in mind the tax liability if converting to a ROTH.
We hear a lot of noise about diversification. Well, if Michael Jordan is on your team and he is scoring all the points. Should you penalize him by diversifying your IRA's more?

We can customize something for you or you can view many of our educational seminars at your leisure. Please contact us directly for more information or to discuss your situation in greater detail.

It's not what you make, It's what you keep that determines your lifestyle. | 04.11.16 @ 17:48
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Angela — Hi Dave, If you get this comment please email me Angela | 06.06.16 @ 18:55
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
Kathleen,

There are a lot of ways to go with this. The simplest answer is you should at least open a ROTH to have the shell started and to begin the 5 year waiting period. It does not matter how many ROTH IRA's you open in the future the waiting period starts with the first one. So to avoid withdrawal concerns i would recommend you at least get something started. If you have the opportunity to contribute to a ROTH 401(k) the rules are different and when you roll it to a ROTH IRA you would start the 5 year waiting period all over again if you do not have that shell open already. Another fact to consider is that we are in the 5th lowest tax bracket in US history and have almost a 20 Trillion dollar deficit. It seems likely that taxes will go up to pay that off in the future and it may be important to have an account that is accessible tax free in the event that does happen. There is another option besides a ROTH for tax free access as well. As for any other specifics i would hesitate to answer without knowing your situation. There are many factors that go into determining what is best for you. | 04.26.16 @ 20:25
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 08:13
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Answered by

Dan Crimmins
Dan Crimmins, Financial Adviser in Woodcliff Lake, NJ

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