Watch Shawn Hirsch, Partner Wealth Management, discuss the benefits of partial Roth IRA conversations. Roth IRAs can provide federal tax free income in retirement and greater flexibility when it comes to distributions.
What’s the difference between a traditional IRA and a Roth IRA?
First, let us take a look at what comprises a traditional IRA:
A traditional individual retirement account (IRA) allows individuals to direct pre-tax income toward investments that can grow tax-deferred. The IRS assesses no capital gains or dividend income taxes until the beneficiary makes a withdrawal. Individual taxpayers can contribute 100% of any earned compensation up to a specified maximum dollar amount.Investopedia.com (2021)
Next, we can define a Roth IRA with the following:
Roth IRAs are similar to traditional IRAs, with the biggest distinction between the two being how they’re taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.Investopedia.com (2021)
With these account types defined, you are better informed as an investor to make the decision for the right account version for you. For more information, contact your trusted financial advisor.
Signet Financial Management, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission and serves as a fiduciary. Signet advisors will help you with:
- Financial planning
- Investment strategies
- Tax planning
- Retirement planning
- Insurance planning
- Estate planning
To protect and grow your wealth is our mission.
Need help with your Roth IRA? Please contact us, Shawn Hirsch or firstname.lastname@example.org to schedule a time to talk.