Choosing the right IRA is a crucial part of building your retirement plan. Traditional and Roth IRAs are the two most popular options, each with tax benefits and unique restrictions that make them ideal for people in different situations. Understanding the distinctions between these two common investment vehicles will help ensure you make the right choice. Use the overview below and talk to an investment professional to decide what’s best for your circumstances. 

A Guide to Picking the Right IRA

The Difference Between Roth & Traditional 

The primary difference between traditional and Roth IRAs is the way contributions are taxed. Contributions to the traditional variety are made with pretax income, which essentially allows your money to grow tax-free. However, you will have to pay taxes on income you withdraw after retirement. Roth accounts, on the other hand, are funded with post-tax income, with no tax penalty for cash withdrawals later. With a traditional type, you’re required to start withdrawing money once you turn 70, while Roth plans have no minimum disbursement requirement.

Which Option Is Best for You?

If you believe that your tax rate will be lower in the future, a traditional IRA may be the best choice, saving you money on disbursements in retirement. However, predicting what your tax situation might be is often difficult, especially if you’re decades from retirement. For this reason, Roth accounts may be better suited to the needs of most investors. Unlike traditional kinds, they also have no penalties for early contribution withdrawals, which makes them especially attractive to young savers who may need those funds in the future.

Selecting the best retirement savings option is a complex process, but the financial professionals at Armstrong County Building & Loan Association will make matters easier. They’ve been serving clients throughout Ford City, PA, for over 90 years, with a wide range of deposit services perfect for any need. Visit their website to learn more about their IRAs and other savings options. Call (724) 763-7137 to make an appointment and open an account.