When I say "Roth" what do you think?
If you're from my neck of the woods, you probably immediately think of the best sound on the radio - the voice of Bill Roth - the announcer of the Virginia Tech Hokies.
He has this wonderful quote that opens every VT football game, "From the blue waters of the Chesapeake Bay to the hills of Tennessee, the Virginia Tech Hokies are on the air!" And then you hear the Virginia Tech fight song, Tech Triumph, which, despite popular belief, it is not "Enter Sandman." Although playing the either is sure to bring down the house in a most raucous way. Just ask Miami.
Ok, I'm digressing. I'm seriously missing my college football. (Can you tell?)
No. The Roth I'm really referring to is Roth IRA's. In the past couple weeks, I've gotten at least 4 different questions on about IRA's.
Roth vs. Traditional
Here's the scoop...in layman's terms.
Traditional IRA contributions are deductible (up to a certain point) in the year when you make the contribution. Making them basically tax-free. But when you draw on them, during retirement, they are taxed at ordinary tax rates.
Roth IRA contributions provide no deduction in the year of contribution, but the draws are tax-free when you meet the minimum requirements.
I see both sides of the coin.
Some financial planners always push traditional IRA's. It's the general thought that you are most likely going to be in a much lower tax bracket during retirement. Therefore, you need the deduction now, while you're in a higher bracket.
Roth IRA backers say that you should always use them because you don't know what tax rates will be in the future. Pay the tax now so that you are guaranteed tax-free money then.
So which do you choose?
Um...it's really up to you. You can't go wrong by saving for your future. i plan on being a millionaire when I get older so I'd rather pay my taxes in the poor rates.
Hope this helps a little. However, if you've got some serious money to invest, you need a professional financial planner and not me. They can run your present & future value, rate of return calculations and all those other fun things the rest of us slept through in Corporate Finance.
All this talk of football has made me want to wear a sweater and eat chili... Of course, it doesn't help that Pandora keeps randomly playing songs from Trans-Siberian Orchestra.
PS - I've only gotten one guest post. I'm begging & pleading for help here people. :) Surely you have something to share. Even you don't have time to write it yet, just let me know you're planning on it so I can stop stressing over it.
If you're from my neck of the woods, you probably immediately think of the best sound on the radio - the voice of Bill Roth - the announcer of the Virginia Tech Hokies.
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Ok, I'm digressing. I'm seriously missing my college football. (Can you tell?)
No. The Roth I'm really referring to is Roth IRA's. In the past couple weeks, I've gotten at least 4 different questions on about IRA's.
Roth vs. Traditional
Here's the scoop...in layman's terms.
Traditional IRA contributions are deductible (up to a certain point) in the year when you make the contribution. Making them basically tax-free. But when you draw on them, during retirement, they are taxed at ordinary tax rates.
Roth IRA contributions provide no deduction in the year of contribution, but the draws are tax-free when you meet the minimum requirements.
I see both sides of the coin.
Some financial planners always push traditional IRA's. It's the general thought that you are most likely going to be in a much lower tax bracket during retirement. Therefore, you need the deduction now, while you're in a higher bracket.
Roth IRA backers say that you should always use them because you don't know what tax rates will be in the future. Pay the tax now so that you are guaranteed tax-free money then.
So which do you choose?
Um...it's really up to you. You can't go wrong by saving for your future. i plan on being a millionaire when I get older so I'd rather pay my taxes in the poor rates.
Hope this helps a little. However, if you've got some serious money to invest, you need a professional financial planner and not me. They can run your present & future value, rate of return calculations and all those other fun things the rest of us slept through in Corporate Finance.
All this talk of football has made me want to wear a sweater and eat chili... Of course, it doesn't help that Pandora keeps randomly playing songs from Trans-Siberian Orchestra.
PS - I've only gotten one guest post. I'm begging & pleading for help here people. :) Surely you have something to share. Even you don't have time to write it yet, just let me know you're planning on it so I can stop stressing over it.
I like Roth. Do you really think tax rates will only be 10% when you are ready to retire? Even if you move down a bracket, by then the gov't will almost certainly have raised the rates.
ReplyDeletePlus, with a Roth, you can take your contributions out at any time. They're yours. No penalty, no taxes. It's a disaster-emergency fund and retirement savings in one. (The earnings can't be taken out before retirement w/o tax and penalty though)