There are tradeoffs between Roth and Pre-Tax retirement accounts. The best choice depends on your situation. The guidance below can help you decide which is best for you, but contributing to either type of account over the course of your career is a great way to save for your future.
Roth Accounts:
-Greater long-term benefit if you’re younger (more years for growth on a retirement account balance you can distribute tax-free in retirement).
-Makes sense if you’re in a lower tax bracket now than you expect to be in later.
Watch out for income limits on Roth IRA contributions.
Pre-Tax Accounts:
-Upfront tax savings in the year of the contribution.
-Withdrawals are taxable, so it’s better if you expect to be in a lower bracket in retirement.
-Useful if you don’t have as many years left for compound growth.
Additional Info:
Having a combination of Pre-Tax accounts and Roth accounts over your career can be a good strategy. You can shift from Roth contributions to Pre-Tax contributions later in your career based on what’s best for you.
If your income is unusually low in a given year, you can consider a taxable Roth conversion (moving funds from a pre-tax account to a Roth account) while you are in a lower tax bracket.
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.