Can a Roth Really Help You Lower Your Taxes?

Patience is a virtue, but will it save you money on taxes? That depends on the situation, but if you’re talking about a Roth IRA, then the answer is typically yes. Traditional IRAs will usually give you an immediate tax savings, while a Roth IRA won’t. However, for those who have patience, a Roth can be a great tax saver in the years to come.
Because the IRS doesn’t give you an immediate tax deduction you are essentially being forced to use your own after-tax income to build your retirement account. The benefit of a Roth IRA over a traditional IRA is that when it comes time to withdraw the money you can take it all tax-free. With a traditional IRA you will be taxed on that income when you withdraw it.
That means your Roth IRA could give you a big boost. Any gains your account has made can be withdrawn tax-free so long as you have had the account for at least five years and as long as you don’t withdraw the money before the age of 59-1/2. There is one other tax-related benefit to Roth IRAs in some cases, and it is an upfront tax break. Some low- or middle-income earners can use what’s called a Saver’s Credit, which allows them to receive a 10-50 percent tax savings on the first $2,000 they put in their retirement account. This goes for 401k plans, as well as both traditional and Roth IRAs.
So there you have it. When it comes to taxes and Roth IRAs, patience is indeed a virtue. Click here to contact us and learn about other tax savings and retirement tips, or give us a call at 1-877-CPA-2006.
Telemedicine | Clay Whitehead
About Clay Whitehead Michael is co-founder and CEO of Drchrono. He has worked as a software engineer since 2000. He had implemented components of the Bloomberg Terminal, used by customers worldwide. Michael has a B.E. in Computer Engineering & Computer Science from Stony Brook University. Michael attended Columbia University in Information Systems. Clay is the…
Disruptive HR Models | Keith Kitani
About Keith Kitani Keith Kitani is the founder and CEO of GuideSpark. He’s a successful entrepreneur and software executive with over 20 years of experience building technology companies. He has been building Software-as-a-Service (SaaS) products and businesses since 1999 when he co-founded Presedia (a rapid eLearning company) and sold it to Macromedia in 2003. At…
Maintaining Relevance | Dirk Lorenz
About Dirk Lorenz Dirk Lorenz ventured out and acquired Fremont Flowers while only 21 and has owned and operated the business for over 25 years. Dirk takes pride in giving back to the community and has started several events at Fremont Flowers over the years such as Good Neighbor Day and Welcome Teacher Day. Dirk…
Is the Market OverValued? | Hal Heaton
About Hal Heaton Hal Heaton is a Professor of Finance at the BYU Marriott Graduate School of Business where he teaches advanced courses in finance and capital markets. Before joining the faulting at BYU, Hal worked at Boston Consulting where he dealt with strategic planning issues for large firms. He has also served on…