IRAs are powerful tools, and should be used to your advantage for retirement savings
Saving in an IRA makes sense whether you have a retirement plan at work or not, but investors then have to decide if a traditional or Roth account is better – as always, it depends.
MarketWatch is hosting a “Mastering Your Money” virtual event, which will include sessions on various important personal finance topics. During one session, reporters and editors will tackle some of the most controversial personal finance decisions, including when to invest in a traditional IRA or Roth IRA, if leasing or buying a car makes most sense and why you may or may not want to go with a Health Savings Account. Join in to watch the Financial Face-Off session on Wednesday, April 20 here.
Another reason to go with a traditional IRA: they may be tax deductible, though that depends on if you’re enrolled in an employer-sponsored retirement plan plan), your tax filing status and your or your spouse’s income limits. That tax deductibility can be quite powerful during the tax season, though – by one analysis, if you’re in the 32% tax bracket and you contribute the annual limit of $6,000, it could equate to as much as $1,000 off your tax bill.
There are plenty of rules associated with traditional and Roth IRAs. For example, you need to be 59 ½ years old to freely withdraw from either account, but you must also begin withdrawals from your traditional IRA by age 72, known as required minimum distributions. Roth accounts do not have RMDs. Congress is also looking at raising the age for required minimum distributions in its follow-up legislation to the Secure Act, which passed in 2019.
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