If you’ve been on the edge of considering a specific place to invest your money for your retirement may I make a suggestion? I suggest the Roth IRA because it allows you to pay taxes on your money while you contribute your money up front, then when you go to pull money out, also known as a distribution, you won’t owe a dime in taxes no matter what kind of returns your money makes in the account.
So in this article I’m going to give you the several reason why a Roth will help you out with your taxes in the long run versus going with a traditional IRA account.
When you hit retirement age you tax liability is going to go up, and if you don’t do something now you’ll end up paying for it in your retirement years. The first reason your taxes will increase is because your kids will have grown up and moved on with their lives. This means the $1000 tax deduction you were getting for each dependent child will no longer be benefiting you. For example if you have 3 kids, this means you would not have to pay taxes on $3000 of earned income.
Second, since you retired you won’t be making a any contributions to you companies retirement program such a 401k. With a 401k program your money is not taxed until you take a withdrawal from it. So every dollar that you put in will be money you won’t have taxed upfront.
Third and finally, when you retire most of your debts will be paid off including your mortgage. This means that the interest payments that you were getting a deduction on in your taxes will no longer be their. For example if you paid $3000 in interest to the bank that would be $3000 you would not owe taxes on as well, but when your home is paid off you won’t get this benefit anymore.
In the end in whether you pick a safe investment or a risky investment follow the Roth IRA advice I’ve given you here and you’ll have a less likely chance of getting hit up with a higher tax bill in the end.