Have you ever wondered the difference between
IRA and Roth or a traditional and Roth and you've heard those terms thrown around
Well, it's important that we know the differences. I think you're gonna love this. Let's break it down
So the first important point is that they're both IRAs a
Roth is not something different than an IRA. You have really two options a
Traditional IRA and a Roth IRA. They're both IRAs. They're just a little different now
there's kind of three categories here that I think are pretty cool is that you can say well
Do I get a tax deduction on the way in and the answer is yes with a traditional?
So let's move this over here. This looks probably a little better to go like this
So I have a traditional versus Roth and yes
You get a tax deduction with a traditional no tax deduction with a Roth now. Does it grow tax-free?
Well that may be a loose term. We'll come back to it
But if you invest with something with the traditional IRA, you don't pay any tax when you sell it same with the Roth
So if you buy Facebook stock and it goes up and you sell it
There's no tax if you buy real estate and you self-direct watch some of my other videos
You don't pay any tax when you sell that real estate or Bitcoin or a Kentucky racehorse?
So you sell it tax deferred tax free. Well, that's the key word here when it comes out
you do pay tax with a
Traditional so you pay tax here and I guess you pay tax before you can put money in a Roth
But what's cool about the Roth is it comes out tax-free? So a gross tax-free and comes out tax freedom
So is there a difference in contributions and which one's better? Well, let's talk a little bit more
So if we talk contributions believe it or not. They are the same I can put
$5,500 in a regular traditional IRA and
$5,500 in a Roth IRA and
If I'm 50 or years or older I can put an extra thousand in so that's sixty five hundred sixty five hundred
Now the tax deduction I can phase out because if I make too much money, I don't get a tax deduction
Which is kind of sad and if I make too much money, I can't even put money in a Roth. Those are the general rules
But what I like is with a Roth you can actually do a non-deductible
Traditional IRA and then convert it to a Roth later. So if you make too much money, I can backdoor it into a run
So look at some more videos on what's called the backdoor IRA. They're pretty cool
You can you can get into a Roth down the road the backdoor Roth
You just make a non-deductible traditional contribution and then convert it. Um
But here's the thing the question is which one's better and on that note mark Kohler
I vote for the Roth every time in the long run
And here's why you it's the time value of money the money grows tax-free
And it comes out tax-free and some you may see people go
Well, you're in a higher bracket now and when you retire you'll be in a lower bracket
Well my clients they want to be in the same bracket when they retire or even better
I mean they're working hard so they can make the same money or more when they're retiring
So do you think that tax rates even might go up in the future? Most people do so I
really do think the majority of
CPAs and financial type tax attorneys and financial advisors are gonna say
If you can really build a Roth, that's where you want to be in the long run now
I'm not even going to get again in get into the 401k strategy watch them on one of my other videos on 401ks
Because you can do better than an IRA if you're a small business owner
Let's play with the 401k and then there's that backdoor Roth strategy. So there's a lot of options out there folks
I'm glad you're watching this video because you want to know the basics here if you're young and just getting started
investing you want to know the difference between our traditional and Arad that's really really important and I
Like all my clients young especially to start saving now put a
$25 a month a
$50 a month $100 a month. If you the more you can do the better just get in that habit of saving
Whether it is a traditional or Roth now again vote for the Roth every time start looking at that
I think you're gonna love it is you start to run the numbers and the hypotheticals
so start saving now know the differences and I think Ords the Roth and
Meet with your tax advisor look at which you know method is going to be best for you to save the most
For the future. It's important
Thanks
Thanks so much for watching that video and I want to be your source for tax and legal strategies
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