Choosing the correct type of IRA is important for your future - Beckley, Bluefield & Lewisburg News, Weather, Sports

Choosing the correct type of IRA is important for your future

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  • Woman suffers minor injuries after car rolls on I-77 in Raleigh County

    Woman suffers minor injuries after car rolls on I-77 in Raleigh County

    Wednesday, July 30 2014 10:13 PM EDT2014-07-31 02:13:55 GMT
    Car rolled multiple times on I-77 North in Raleigh County.Car rolled multiple times on I-77 North in Raleigh County.
    In Raleigh County, a woman is miraculously not seriously injured, after her car rolls over on I-77 around 6:30 Wednesday night.An eyewitness tells us the woman was driving in the left lane on the northbound side. She suddenly veered off the road, over corrected,then slammed into the side of a tractor trailer. The car rolled multiple times before coming to a stop on it's roof.The witness says two small dogs ran out of the car. Moments later, the woman crawled out and ran after one of the dogs....
    In Raleigh County, a woman is miraculously not seriously injured, after her car rolls over on I-77 around 6:30 Wednesday night.An eyewitness tells us the woman was driving in the left lane on the northbound side. She suddenly veered off the road, over corrected,then slammed into the side of a tractor trailer. The car rolled multiple times before coming to a stop on it's roof.The witness says two small dogs ran out of the car. Moments later, the woman crawled out and ran after one of the dogs....
  • Two Arrested on Burglary Charges

    Two Arrested on Burglary Charges

    Thursday, July 31 2014 1:06 AM EDT2014-07-31 05:06:28 GMT
    Yonts and McGee face several chargesYonts and McGee face several charges
    Two were arrested late Wednesday night (7/30) on several charges in Fayette County.
    Two were arrested late Wednesday night (7/30) on several charges in Fayette County.
  • Flag cut down at Raleigh County Public Library in Beckley

    Flag cut down at Raleigh County Public Library in Beckley

    Wednesday, July 30 2014 8:46 PM EDT2014-07-31 00:46:27 GMT
     The incident happened at midnight between Sunday, July 27 and Monday, July 28. Officials with the library said that a person stood outside the library a made sure that no one was inside at the time.
     The incident happened at midnight between Sunday, July 27 and Monday, July 28. Officials with the library said that a person stood outside the library a made sure that no one was inside at the time.
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  • When you think you know everything, check online

    When you think you know everything, check online

    Wednesday, July 30 2014 6:00 AM EDT2014-07-30 10:00:22 GMT
    So, I’m strolling down Capitol Street in Charleston, taking in the joyous FestivALL celebration when I notice a pair of young boys smirking at my T-shirt.
    So, I’m strolling down Capitol Street in Charleston, taking in the joyous FestivALL celebration when I notice a pair of young boys smirking at my T-shirt.
  • Solving those devil-dog, double-word problems

    Solving those devil-dog, double-word problems

    Tuesday, July 29 2014 6:00 AM EDT2014-07-29 10:00:23 GMT
    Let’s play a word game. You will find the answers at the end, but if you cheat when playing Scrabble (as I do), you might cheat now. Of course, then, you would miss the fun of playing.
    Let’s play a word game. You will find the answers at the end, but if you cheat when playing Scrabble (as I do), you might cheat now. Of course, then, you would miss the fun of playing.
  • When not to resist the temptation of a ‘do not touch’ warning

    When not to resist the temptation of a ‘do not touch’ warning

    Monday, July 28 2014 6:00 AM EDT2014-07-28 10:00:27 GMT
    There is a button on my computer that the salesman told me never to push. It is there to “revert back to factory settings.”
    There is a button on my computer that the salesman told me never to push. It is there to “revert back to factory settings.”

This article was prepared by Northwestern Mutual with the cooperation of John A. Barnes. The information is not considered legal or tax advice. Please consult your tax attorney. Barnes is a financial advisor with Northwestern Mutual, the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, Wis., and its subsidiaries. Barnes is based in Morgantown.  To contact him, call 304 292-3339, email j.a.barnes@nm.com, or visit jabarnes.nm.com.

Investing for retirement is one of the most important things you can do for your future. Yet an employer-sponsored savings plan, such as a 401(k), may not be enough to provide the savings you need. For many, an individual retirement account is one of the best ways to accumulate additional retirement savings on a tax-advantaged basis.

There are two main types of IRAs: Traditional and Roth. Both have the same contribution limits, the same catch-up provisions for people age 50 and older (for this year's amount, go to the Internal Revenue Service website, www.irs.gov), and both allow your investment earnings to compound tax-deferred until you start taking withdrawals, typically at retirement. 

To help determine which IRA is right for you, consider how they differ. 

Eligibility

You can contribute to a traditional IRA provided you (or your spouse, if you are married and file jointly) have earned income and you will not turn age 70 1/2 by the end of the year. In contrast, Roth IRAs are subject to income limits, which means not everyone can take advantage of one. To learn more about your eligibility, consult the IRS website at www.irs.gov. 

Deductibility

Contributions to a traditional IRA may be tax deductible, subject to certain requirements. And any contributions you make may help lower your taxable income in the year in which you make them. With a Roth IRA, contributions are made with after-tax dollars, meaning the money you contribute has already been taxed, with no benefit of a deduction. 

Other tax advantages

When money is taken from a Roth IRA at retirement, it's potentially tax-free — and that includes your tax-deferred earnings. That's different from a traditional IRA, which is fully taxable at current tax rates when withdrawn. 

Traditional IRAs require you to begin taking minimum required distrbutions at age 70 1/2 — whether or not you need the money. If you fail to take your distribution, you'll face stiff penalties.

In contrast, Roth IRA owners are not subject to mandatory withdrawals at age 70 1/2. This means you can extend the tax advantages of your account longer than with a traditional IRA. 

Which is better?

One rule of thumb suggests that if you think your tax rate today is higher than it will be in retirement, a traditional IRA may make sense. Conversely, if your tax rate is lower than you think it will be in retirement, a Roth IRA may be the better choice, assuming you qualify for one. However, because everyone's situation is different, be sure to consult with a financial representative or tax professional to carefully weigh all the factors and determine which IRA is best for you.