"Roth vs. Traditional IRA: The Epic Battle Between Two Retirement Accounts"

Introduction:

Welcome, future retirees and bewildered twenty-somethings and everyone in between! Today there is an epic match between the two retiree accounts Traditional IRA vs. Roth IRA. We want a good clean fight, and we want you two playing by the rules. The goal is to educate the audience about which retirement account will be right for them. Without further delay, in words of Micheal Buffer "LET'S GET READY TO RUMBLE!"

1. Meet the Competitors.

• Roth IRA- According to schwab.com a Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax-free and penalty free after age 59½ and once the account has been open for five years. Think of Roth IRA as the cool friend that you kick it with and when you receive money from them, they won't ask for it back. Isn't that lovely?

• Traditional IRA- A statement from Schawb.com states that A traditional IRA is an account to which you can contribute pre-tax or after-tax dollars. Your contributions may be tax deductible depending on your situation, helping to give you immediate tax benefits. So, the Traditional IRA is like that friend that brings soda as soon as you say you're having a cook-out. Sure, they can take a little bit of your income now, but they can let you off the hook tax-wise until you’re older. Thanks for looking out, Trad IRA!

2. The Matchup (Tax now vs. Tax Later)

• Roth IRA- Definitely reminds you of the person that likes to live in the moment. With Roth IRA you get to pay the taxes upfront and get to enjoy a tax-free life later on. According to Schwab.com, a Roth IRA can be a good savings option for those who expect to be in a higher tax bracket in the future, making tax-free withdrawals even more advantageous.

  
  

• Traditional IRA- Schwab.com states that With a Traditional IRA, your money can grow tax deferred, but you'll pay ordinary income tax on your withdrawals, and you must start taking distributions after age 73. It's like ordering your dessert now and paying for it with your retirement savings.

Amazing battle so far! It's getting intense!

3. Income Limits.

• Roth IRA- A Roth IRA can be a good savings option for those who are in or expect to be in the high tax bracket or an elite money earner. This allows tax-free withdrawals to be even better. However, there are income limitations to opening a Roth IRA, so not everyone will be eligible for this type of retirement account.

  
  

• Traditional IRA- Schwab.com states that Unlike with a Roth IRA, there are no income limitations to opening a Traditional IRA. It may be a good option for those who expect to be in the same or lower tax bracket in the future.

There are fighting as if they're life depends on it! (Or better yet like your retirement depends on it, but I digress)

4. The Pros and Cons Showdown

1. The Pros

• Roth IRA -Roth's were designed for retirement savings, however you can have access to the contributions any time without being penalized. Also, unlike traditional IRAs, Roth IRAs do not have RMDs (required minimum distributions), allowing your assets more time to grow tax free. Lastly, you can pass your money to your heirs' tax- free as well so your children or their children don't have to deal with a tax burden.

• Traditional IRA- With Traditional IRA you can contribute to it on a pre-tax basis (if your income is below a certain threshold, you pay no tax until you decide to withdraw money from it. In addition, if you (or your spouse) don't have access to an employer-sponsored plan, traditional IRA contributions are tax-deductible, and they offer better opportunities that your traditional 401k's because unlike 401k, a traditional IRA can help lower your taxable income.

Omg!!! The fight is almost over! I wonder who's going to win?

2. The Cons

• Roth IRA- Ashlyn Brooks from usatoday.com states that one potential pitfall of Roth IRAs is that they might disadvantage high earners. Because contributions are made post-tax, savers in higher tax brackets could find themselves paying more now than they would in their retirement years, when their tax brackets might be lower. Another downfall to having a Roth IRA would be that unlike traditional IRA contributions, Roth IRA contributions aren’t tax-deductible. Ouch!

• Traditional IRA- Penalties. Since the IRA is intended for retirement, there are often penalties if you take out your money before retirement age. With the traditional IRA, you'll face a 10% penalty on top of the taxes owed for any withdrawals before age 59½. Yikes!

Who's the winner?

So, who wins the retirement showdown? It really depends on your personal preference and future endeavors. Are you on team ‘pay-now-and-chill-later’ IRA Roth fan or are you team ‘defer-and-enjoy-the-moment’ Traditional IRA? Whatever you decide, both accounts are here to help you build a nest egg, so choose wisely, and may the tax benefits be ever in your favor. When it comes to investing in your financial future, we are all winners!

Bottom line:

There it is folks! The epic showdown between Roth IRA and Traditional IRA. That was a good battle for future retirees! Now you know the difference between the two and you are moving forward to your financial freedom. Now, say it with me, LET'S GET READY TO RETIRE!!!

Call to Action:

If you enjoyed the retiree showdown, make sure to share this post with your family and friends – and maybe learn a thing or two about IRAs while they’re at it!