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What to Know about Traditional and Roth IRAs

  February 18, 2020  |    #Tools

What retirement plan is right for you

Only 27% of LGBTQ individuals claim to be participating in an employer-sponsored retirement plan. If we want a fabulous life well into our golden years, we must invest in a retirement account—and two of our options are the traditional and Roth IRAs.

Hear deciding factors for choosing Traditional or Roth IRAs

 Do Traditional or Roth IRAs benefit YOU more

On this episode of Queer Money®, we’re discussing the pros and cons of the traditional versus Roth IRA and helping you decide which type of retirement account is best for you. We explain the need for the LGBTQ community to save for the future and share the encouraging results of our retirement account poll in the Queer Money® Facebook Group.

We walk you through the pros and cons of the traditional IRA, covering its immediate tax benefit and the penalty for early withdrawal. And we describe how the Roth differs, from its income limits on contributions to its tax benefit when you retire. Listen in for insight on deciding which retirement account is the right fit for you and learn about the advantages of saving for retirement via an IRA.

Topics covered on traditional and Roth IRA 

The fundamentals of an individual retirement account (IRA)

  • Retirement account for one person only
  • Help save for retirement in lieu of pension
  • All have a tax advantage (money invested to grow)

Why the LGBTQ community needs to learn about IRAs

  • Only 27% participation according to Prudential survey
  • More likely to have higher expenses in retirement

Our Facebook group retirement account poll results

  • 39 have 401(k)s
  • 29 have Roth IRAs
  • 21 have traditional IRAs
  • 11 have 403(b)s
  • 11 have HSAs

The advantages of the traditional IRA

  • Contributions tax-deductible or tax-deferred
  • No annual income limit on contributions

The disadvantages of the traditional IRA

  • Must start taking annual withdrawals at age 70½
  • Pay taxes on withdrawals in retirement
  • Early withdrawals taxed + subject to 10% penalty

The advantages of the Roth IRA

  • No withdrawals required by the original owner
  • Not taxed on qualified withdrawals in retirement
  • Contributions can be withdrawn any time without penalty

The disadvantages of the Roth IRA

  • Contributions not tax-deductible
  • Income limits on contributions

How to decide between the traditional and Roth IRA

  • Income higher before retirement = traditional
  • Income higher IN retirement = Roth
  • Consult with tax advisor or accountant

Resources on IRAs

2020 Roth IRA vs Traditional IRA Comparison

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