Which IRA is right for you?

Print Story | Email Story
The individual retirement account (IRA) is celebrating its golden anniversary. Created in 1974, this savings vehicle has helped millions of people build resources for retirement. And in 1997, the Roth IRA was introduced. But which IRA is right for you?
 
Let's look at the basic differences between the two IRAs. With a traditional IRA, you generally invest pretax dollars, so the more you put in, the lower your taxable income. Your earnings grow tax deferred, meaning you pay no taxes on them until you start taking withdrawals. (If you take withdrawals before you reach 59½, you'll be subject to ordinary income tax and a 10 percent IRA penalty.)
 
When you invest in a Roth IRA, your contributions aren't deductible, but they can be withdrawn at any time, tax- and penalty-free. And you can typically withdraw your earnings on these contributions tax free once you're 59½ and you've had your account at least five years. (If you don't meet these conditions, withdrawals of earnings are subject to income taxes and the 10 percent penalty.)
 
So, are you better off by taking the immediate tax break offered by a traditional IRA or the long-term benefits of tax-free withdrawals available with a Roth IRA?
 
If you think you'll be in a higher tax bracket when you retire, you might want to consider a Roth IRA, especially if you have a long time until retirement. This will give you more opportunities to put away funds that can be withdrawn tax free. Conversely, if you think you might be in a lower tax bracket upon retirement, you might lean toward a traditional IRA, as you'd get the tax benefits now, when you're in a higher bracket, and can eventually make your taxable withdrawals when you're in a lower one.
 
Here's something else to keep in mind: Once you turn 73 (or 75 if you were born in 1960 or later), you must start taking taxable withdrawals — technically called required minimum distributions, or RMDs — from your traditional IRA. But if you have a Roth IRA, you won't face RMDs and can essentially keep the money in your account indefinitely. If you don't need all the funds in your Roth IRA for your retirement, you can pass them on to your heirs.
 
Ultimately, though, your income may determine which IRA is right for you. You can earn any amount and contribute to a traditional IRA, though if you exceed certain income limits, your contributions may no longer be tax deductible. If you and your spouse don't have a 401(k) or other retirement plan through your employers, you can make a full, deductible contribution to a traditional IRA regardless of your income.
 
But you may not be able to contribute to a Roth IRA, or at least not make the full maximum annual contributions, if your income is above certain levels. Your tax advisor can explain these levels, which often increase from year to year. (In 2024, the most you can contribute to either IRA, depending on your income, is $7,000 per year, or $8,000 if you're 50 or older.)
 
Under some circumstances, you can convert a traditional IRA to a Roth IRA, though you'll need to pay taxes on the conversion. In any case, think carefully about your options and make the choices that are appropriate for your needs.
If you would like to contribute information on this article, contact us at info@iberkshires.com.

413 Day Bring Lt. Gov. Driscoll to North Adams

By Tammy Daniels iBerkshires Staff

The lieutenant governor makes hearts with Director Kristy Edmunds.
NORTH ADAMS, Mass. — Lt. Gov. Kim Driscoll kicked off "413 Day" at Massachusetts Museum of Contemporary Art on Sunday before heading to three more locations. 
 
"This is what you see in the 413," she exclaimed as she opened her arms under Spencer Finch's "Cosmic Latte."
 
New England Public Media's "The Fabulous 413" radio show is behind 413 Day (the 13th day of the fourth month) as a way to celebrate the western end of the state. NEPM holds a free festival at CitySpace in Easthampton, where Driscoll was headed later in the afternoon. She was also to visit the state's Great Falls Discovery Center in Turners Falls and tour the Springfield Museums. 
 
"Our hope is that we can really have this be something that begins to send a message, people who live in 617, you're missing the boat out here, not coming to 413," Driscoll said.
 
Driscoll took a quick tour through several exhibits with by Director Kristy Edmunds, Mayor Jennifer Macksey, MoCA's Director of Communications Jennifer Falk and head of public initiatives Morgan Everett,  Mohawk Trail Association President Peter Tomyl and Governor's Councillor Tara Jacobs, among others. 
 
"It's always a great day to have the LG in North Adams," said Macksey. "[Gov.] Maura Healey and Kim Driscoll have been great partners to North Adams and we look forward to many, many continued efforts to get more funding in North Adams."
 
She made sure to ask about the proposed $100 million more in Chapter 90 funds, which is in the Legislature right now, and Tomyl piped up about the proposed passenger rail. 
 
View Full Story

More North Adams Stories