Roth IRA accounts have been around now for just over ten years. It has been, in my opinion, a great way to save for retirement. The reason I favor the Roth IRA is because at the time of distribution, if you are over the age of 59 ½ the amounts taken out or not subject to taxation. As I reflect upon the reasons the Government suggested to everyone back in the 70’s and 80’s and since, that greatness of regular IRA’s and everyone should have one it has become very obvious our society, tax laws and the economy of the United States ( as well as World ) has changed. In the early years of IRA’s the argument or sales tag to have IRA’s was “when you retire, you’ll be in a lower tax bracket.”
Roth IRA Distributions
However in most cases that is just not true. Many retirees are not in a lower tax bracket and in some cases when regular IRA distributions are taken out it will trigger the taxation of some of their Social Security benefits. With Roth IRA’s the distributions are not included in your income additionally you’re not “forced” into taking money out simply because you have reached the magical age of 70 ½ like with regular retirement accounts.
I also feel that Roth accounts are a great idea is because you can convert any or some of your regular IRA’s into Roth IRA’s and pay the taxes now on the amount you convert. This may be a great benefit as it now seems some kind of tax increase is inevitable by our government at this time. So rather than waiting to pay the taxes as the money comes out later, if the tax rates go up, or if the government decides to create new taxes on retirement accounts, you can convert your regular IRA’s to Roth IRA’s pay the tax now and now have to worry about what the IRS will or won’t do in the future.