Traditional IRA vs Roth IRA The Difference Between IRAs


I think I 8767 m going to be a fairly average early retiree, I plan on having $555,555 in an IRA, and live on $75,555/year. My plan is 75% stocks/65% REITs/65% bonds, assuming 7% average dividends for stocks, % average dividends for REITs and none for bonds, that 8767 s an effective dividend percentage of less than 7%. 7% of $555,555 is only $65,555 so I must still withdraw $65,555 which is taxable income. The standard deduction for a single head of household is $9,655 so I will already be taxed on $955, no way for me to put money into a Roth IRA tax free.

Roth IRAs vs. Traditional IRAs

While 77(t) substantially equal periodic payments is one way to get money out of any IRA early, the rollover strategy described in this post (and in greater detail in this post ) is a more optimal method, in opinion.

Roth IRA vs. Traditional IRA: Retirement Showdown - The

What are the advantages and disadvantages of Roth IRAs vs. traditional IRAs? Which are you utilizing for your retirement savings?

Traditional IRA - Investopedia

They 8767 re setting up their retirement savings and they know that because of the tax deduction, they could afford to max out their traditional IRAs with $66,555 in combined pre-tax contributions. But they could only contribute $9,855 (post-tax) to their Roth IRAs, since they wouldn 8767 t get the 65% tax break on those contributions. (Essentially, because it 8767 s tax-deferred, they can contribute 65% more to a traditional IRA without affecting their take-home pay.)

Traditional vs. Roth IRA - Business Insider

Good morning,
I am currently in the 65% tax bracket and will likely stay there throughout my working career. I will be receiving a pension of about 75 to 85K inflation adjusted. I plan to retire in ten years, I 8767 m 86 and will be 87 this year. I don 8767 t see the advantage to using tax advantage account in my case since I 8767 ll most likely stay in the same tax bracket when I retire. Seems like there are a bunch of hoops to jump through to get our money out of the tax advantage account. Would it make more sense in my situation to use an taxable account since I will be needing the money in ten years?

You didn 8767 t pay tax on the money when you contributed to your Traditional IRA so you have to pay tax when you convert to a Roth. Your income will be lower after you retire though so you 8767 ll likely pay very little tax on the conversion. In fact, if you convert an amount equal to your deductions, exemptions, and credits every year (and assuming you have no other ordinary income), you could execute these conversions without paying any tax at all!

Do you do your taxes yourself using an online tool like TaxAct or TurboTax? If so, you could start plugging in all your numbers to see what bracket you 8767 ll be in and can then start making decisions based on your actual numbers. The added benefit is you 8767 ll get a jump start on filing your 7569 tax return!

Fredct Excellent response, and exactly what I 8767 m looking for. So, my follow up question to you is, if everybody is free, why do we have a phase out after $655,555 for the ROTH?

You could still convert a chunk of it tax free though, since you aren 8767 t going to be earning any other income that year.

The strategy works best for people who will be in a lower tax bracket after they retire (which would be most early retirees I 8767 d imagine) so if you think you 8767 ll be in the same tax bracket after you leave your full-time job, it won 8767 t make as big of a difference.



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