You got a raise, paid off debt, and built an emergency reserve.  Now you want to start saving for retirement.  Should you choose an IRA or ROTH IRA?  The answer comes down to timing, eligibility, and your goals.

Timing

The more time you have before utilizing your retirement funds, the more beneficial a ROTH becomes.  A ROTH’s ability to grow tax deferred and come out tax free can create a great tax benefit in retirement after years of compounding growth.

ROTH contributions when nearing retirement, however, lose effectiveness with no tax deductibility and a shorter time frame for accumulation.  Whereas, a traditional IRA becomes more effective in near term scenarios when tax deductibility is available.

Eligibility

Are you eligible to participate in an IRA or ROTH IRA?  In an employer sponsored plan, your income and eligibility impact the availability of ROTH options and the tax deductibility of Traditional IRA’s.  These factors could make the decision for you as they narrow your choices.

Goals

What if your employer sponsored plan does not offer a ROTH option (as is frequently the case)?  Contributing to a ROTH IRA can provide you with good tax diversification options within your retirement.

As your income and eligibility in an employer sponsored plan can impact your benefits and ability to utilize these vehicles, consult a qualified advisor to help you decide your financial future.

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Always remember that while this is an investor education piece, this does not trigger or relate to trading activity on your account with Financial Future Services. This article is for informational purposes only and not intended as a recommendation. Each investor's circumstances are different and a full review of you situation is necessary for a recommendation.

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