A Look At The Best Traditional IRAs

If you’re planning to retire one day, then you should probably start thinking about investing some of your earnings into an IRA, or individual retirement account.  The best traditional IRAs provide a wide range of benefits to you, and are designed to provide a healthy retirement income once you leave the work force.  After all, if you’ve put your time in, you should be able to enjoy your golden years, right?  With all of the different options being marketed to you, how do you know what is the best traditional IRA?  The decision comes down to your current financial situation, but here is a basic rundown of some accounts worth looking into.

Deductible IRA – To qualify for a deductible traditional IRA, you’ll need to fall under $66,000 annual income as a single individual, or under $109,000 annual income for couples.  Withdrawals from these types of accounts can be made for up to $10,000 on the purchase of a new home, secondary or higher learning, as well as in the tragic event of your disability or untimely death.  Distributions made from a deductible IRA are taxed as personal income.

Non-Deductible IRA – Anyone who has earned income is eligible for a non-deductible IRA.  These IRAs are great if you are in a high tax bracket while paying into the account, but expect to be in a much lower bracket upon receiving the funds.  For instance, if you are in the 28% tax bracket right now, and plan to retire in the 15%, you’ll see a lot bigger gains from the extra taxes saved on your withdrawal.

Roth IRA – This will be your best option if you qualify.  The Roth IRA allows for tax-free and penalty-free withdrawal at age 59 ½.  Contributions made are after tax, paid in after your personal income taxes have been settled.  Because you pay taxes on the funds up front, if you wait until age 59 ½, you’ll be able to withdraw the entire account without having to pay any fees or taxes.  However, if you intend to deplete the account too early, you will pay a substantial amount back to the government, being assessed early withdrawal penalties and taxes on investment gains.

The question “What is the best traditional IRA” comes down to your personal situation.  Depending on the amount of money that you earn, and how you intend to use your retirement account, one certain IRA may be better than another.  If you have problems determining the right account for your financial circumstances both now, and when you retire, then you should seek the help of a professional financial advisor.  Everyone’s financial background and income levels are different, so there is no one size fits all retirement plan.