Roth or Regular IRA: Which is best for me?           

Now that the kids are out on their own, I finally have extra money to set aside for retirement. I just don’t know where to put it. I’ll be 50 years old this year and I want to invest all I can in IRAs during my final 15 or so years of work. Which should I choose? Roth IRA or regular IRA?

You don’t have to make a choice. It’s possible to contribute to both Roth and regular Independent Retirement Accounts (IRAs), as long as you follow guidelines for both. A couple of important things to consider include 1)Tax advantages and 2) Income restrictions. Here are a few differences between regular and Roth IRAs in those areas :                                                                                                                                                                   

Requirements        Roth IRA__________________________ Regular IRA__________________

 Income eligibility       Must have US earned income. May contribute if adjusted gross income does not exceed income limits.    Must have US earned income. No income limit restrictions on amounts of contributions.      
Tax Deductibility  Roth IRA contributions are made after you pay taxes, so they are not tax deductible. The amount of money you can contribute to a Roth is based on your adjusted gross income (AGI) and your tax return filing status.Contributions made before paying taxes. Deductibility depends on your income, filing status, and whether or not you and your spouse are covered by a retirement plan at work.    


  Withdrawals       Not taxed or penalized for withdrawing contributions and earnings – unless your Roth IRA account isn’t at least five years old or you’re not 59½ years old. and  or you’re not yet over age 59 ½. And unlike with Traditional IRAs, the IRS doesn’t require the original account holder of a Roth to take any required minimum distributions (RMDs) when they reach age 72. You control when you want to withdraw your money. If you don’t need the money in your Roth, you can leave it alone and it may continue to be tax-free – as will any potential growth.    Withdraw anytime,  but deductible contributions are taxable and subject to penalties if withdrawn before age 59 ½.        
Withdrawal exceptions  Text Box: Tax-free and penalty-free if taken at least 5 years after the year of your first contribution and you've reached age 59½, or become totally disabled, died or meet the requirements for first-time home purchase.

Text Box: Taxable if withdrawn before age 59½ and generally subject to penalties as well    

For further details on Roth IRAs vs. Regular IRAs, contact Ron VanSuksum, AAM LLC, 616-531-5220.

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