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Financial Planning

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Traditional IRA versus Roth IRA
Which is your best financial choice

An IRA, individual retirement account is a personal savings plan that allows you to set money aside that gets special tax advantage. Managing your IRA well help you take the most financial advantage of this plan.

A traditional IRA allows you contributions to be partially or completely tax deductible depending upon your personal tax and financial situation. These contributions are usually not taxed then until you withdraw them.

A Roth IRA allows you to put in after tax contributions. The advantage is that these contributions are usually not taxed at the time you withdraw them.

So, in a sense you either pay taxes now or pay taxes later. The real question is which one will provide you with the most financial help. The answer is, “It depends.”

Once again we have a handy calculator that will give the best financial advice we can offer on it. Keep in mind. This is a projection based upon the variables you enter. You can see how when some of the variables are altered the effect will have.

Personally, I think a blend of both traditional and non-traditional IRA’s are best. So much depends upon you financial situation along with projected revenue or lack of revenue streams at time of retirement.

 

IRA to Roth Conversion Calculator
This calculator that will give you an idea of the consequences of converting a Traditional IRA to a Roth IRA.

Assumptions: Federal Adjusted Gross Income(AGI) before IRA conversion is assumed to be $100,000 or less, if married it assumed you are filing jointly, and contributions that have been made to any Traditional IRA were fully deductible.

Current taxable amount in Traditional IRA ($):
Number of years till you retire (#):
Expected annual rate of return on investments before retirement (%):
Your Federal tax rate (%):
Number of years of anticipated retirement (#):
Expected annual rate of return on investsments after retirement (%):
Your anticipated Federal tax rate during retirement (#):
Results Traditional IRA Roth IRA
Estimated account value at retirement:
Annual distribution:
Total value of distributions:
Taxes due at conversion: N/A
Lost investment opportunity: N/A
Post retirement tax: N/A
Total tax due:
Net after-tax value of account:
Greatest Net Value:
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