Which IRA should I choose?
Which type of IRA is better for me? This is a common question asked by individuals perparing for retirment. Salt Lake City, Utah, Estate planning attorney Jeff Butler provides the following FAQ about IRAs.
Question: What are the 3 most common IRAs?
Answer: Traditional IRA, Roth IRA, and Rollover IRA.
Question: Which IRA is better for me?
Answer: That’s a difficult question to answer because every individual’s needs are different. Let me explain:
- Traditional IRAs are the most common IRAs. An individual may contribute $5,000 annually into a traditional IRA. Individuals over 50-years old may contribute $6,000 annually. One tax advantage of the Traditional IRA is that the contribution is deductible the year the money is contributed.
- Roth IRAs are relatively new–they were created in 1997. Unlike a Traditional IRA where the contribution is deductible the year it is contributed, an individual contributing to a Roth IRA does not get a tax deduction when the money is contributed, but the income is withdrawn tax free.
- Rollover IRAs are simply the act of rolling over an employer sponsored retiment plan into an IRA.
Question: If I want to learn more about IRAs, what should I do next?