ADVERTISEMENT

A Tax-Free Hammock at 65 Comments

  • By DailyWorth Team
  • April 25, 2012

Best Combo for retirement

Imagine you’re about to retire and you’ve got a nice little nest egg saved up. (Way to go!)

Obviously, you want to keep as much of your hard-earned cash as possible, while surrendering as little as possible to the IRS upon withdrawal. That’s why you should consider opening a Roth IRA.

The primary advantage of a Roth IRA is that you make after-tax contributions—so when you withdraw that money in 20, 30, or 40 years, it’s tax free.

This year you can contribute up to $5,000 ($6,000 if you’re over 50) to a Roth or traditional IRA. With a traditional IRA, you get a tax break now—but you’ll owe taxes when you start withdrawing that money.

Bottom line: If you expect to be in a higher tax bracket when you retire—or you want a portion of your nest egg to be tax free—make a Roth part of your plan.

And remember: In many cases, you can open and fund a Roth in addition to your 401k.

 

Pay it forward. Do you have a traditional IRA or a Roth? How did you choose?

Tagged in: Saving, Retirement
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

© Copyright DailyWorth 2014