3 People Who Benefit from a Roth (and 2 Who Don't)
by Roger A. Young, CFP®, Senior Financial Planner, T. Rowe Price
Jul 19, 2018
3 minutes
Let's say you're working and saving for retirement and you have a choice between a traditional IRA or 401(k) or a Roth version of the same type of account. How do you choose?
As you can imagine, taxes are the primary factor to consider. That's because the way you put money into these accounts and then later take it out is very different:
- Traditional retirement accounts are funded with money on a pretax basis, meaning it comes straight out of your paycheck before you pay any taxes on it. That reduces your taxable income and essentially gives you a tax break for the same year. However, that tax break comes with strings attached. When it's time to start taking money out of those accounts, you're going to have to pay taxes on every dollar you withdraw.
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