What IRA is Right For You?

March 24, 2015 : Alex Benke

Editor’s Note: An Individual Retirement Account (or IRA) is one option to save money over time. However, you might not know that there are different kinds of IRAs, with different benefits. Let’s look at Roth vs. Traditional IRA and find out which one might be the best for you.

IRAs are tax-advantaged retirement savings accounts in which people who have earned income in a given year can contribute up to $5,500 per year (or $6,500 for those 50 and older).

Picking the right IRA can be tricky. You may qualify for multiple types depending on your income, age, and how much you contribute to other retirement accounts.

If you have to choose between types, your current and future tax bracket also have an impact on which account is best. In some cases, advanced IRA planning can be used to extract additional tax benefits by converting between IRA types.

They can be used in addition to a 401(k) or other employer-sponsored retirement plan. There are two types—a traditional IRA and a Roth IRA—each with its own guidelines and tax advantages.

  • In a traditional IRA, contributions may be tax-deductible, and all growth is tax-deferred. Tax is only paid upon withdrawal in retirement.
  • In a Roth IRA, contributions are not tax-deductible, but qualified withdrawals and growth are tax-free.

The IRA qualification rules are complex and often misunderstood. To make it quick and easy to select the IRA type that’s best for your needs and situation, we have developed this calculator. Note: This calculator is intended to help with IRA selection only. To meet your retirement goals, you may also need to invest in employer-sponsored plans or other accounts.

This article, written by Alex Benke, originally appeared on Betterment. The opinions expressed by Alex Benke are strictly his own and do not necessarily represent those of Betterment.

The content on this post is not intended to provide tax, legal, accounting, financial, or professional advice, and readers are advised to seek out qualified professionals that provide advice on these issues for specific client circumstances. In addition, the publisher/blogger cannot guarantee that the information on this website/post has not been outdated or otherwise rendered incorrect by subsequent new research, legislation, or other changes in law or binding guidance. The publisher/blogger shall not have any liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website/post. In addition, any advice, articles, or commentary included in this website/post do not constitute a tax opinion and are not intended or written to be used, nor can they be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

Related Topics

Related Resources

Bitcoin Income: Exploring Capital Gains & Stock Value | H&R Block

Have you recently earned Bitcoin income from rising stock value? Explore the rules surrounding cryptocurrency-sourced capital gains and losses with H&R Block.

The IRS, Bitcoin, and Other Virtual Currencies | H&R Block

Have you found yourself wondering how the IRS classifies Bitcoin? Our tax pros discuss relevant IRS Bitcoin law and notices. Learn more with H&R Block.

Farmer’s Market Tax Tips

If you are selling items at a farmer's market, learn how to file your taxes with H&R Block. From cash income to bartering, these tax tips will help.

Bitcoin, Taxes, and the Modern Entrepreneur | H&R Block

Many entrepreneurs find themselves wondering exactly how Bitcoin is taxed. Our H&R Block Tax Pros are prepared to assist self-employed filers with Bitcoin taxation.

Alex Benke

Alex Benke

Guest Contributor

Alex is a Certified Financial Planner and Product Manager who leads Advice and Analysis initiatives at Betterment. He believes good financial advice should be available to everyone, no matter what their means or net worth.