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Fixed Rate Vs Roth

gnfishn42
  |     |   1 posts since 2021

If I've already paid taxes on my deposit and want to open an IRA is any advantage to a Fixed Rate IRA vs a Roth?

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Answers
Ally6770
  |     |   4,294 posts since 2010
With a traditional IRA you deduct the contribution and pay taxes on the money and its earnings when you withdraw. With a Roth you do not deduct the contribution and when you withdraw it the money and the earnings are not taxable.
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GreenDream
  |     |   358 posts since 2019
The main difference between an IRA and a Roth IRA is when taxes are paid. IRAs you pay taxes when you withdraw the money, Roth you pay the taxes before you put the money in.
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Ally6770
  |     |   4,294 posts since 2010
All inherited IRA's have to be withdrawn in 10 years now even Roths. So glad I disclaimed all my husband IRA's when he passed. I am still collecting on the small IRA my mother left for all of her children. She passed 20 years ago. The RMD's were deducted according to the age the children when it was inherited. Another reason to have Roths is the income from a Roth is not counted for MAGI where other non taxable income is when it is calculated toward the amount you will pay for your Medicare premium. Higher incomes pay higher Medicare premiums.
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me1004
  |     |   1,379 posts since 2010
Longevity makes the difference. A benefit of a ROTH IRA is that you pay no tax on the earnings, but also, you are not subject to mandatory withdrawals starting at age 70, you can leave the money in the ROTH for as long as you want, continuing to earn tax free. The ROTH becomes a better deal with longevity, with more and more untaxable earnings piling up in it.
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GreenDream
  |     |   358 posts since 2019
Good points me1004.

Another benefit of the Roth is if you die, your heirs can get the money tax-free. And with the recent change to how long they have to withdraw the money from inherited IRAs, the Roth is an even better deal for your heirs then a regular IRA, under the new rules. regular IRAs would have potentially larger withdraws over a shorter time-span (within 10 years for non-spouses under the new rules instead of stretched over their life expectancy as with the old rules) resulting in potentially huge tax bills in those 10 years for your heirs.

Of course a potential drawback of the Roth is if your tax rate ends up lower in the future (when you'd want to make a withdraw) than when you paid the taxes on the money that went into it. so it's not all pluses with no minuses. There's always tradeoffs to be made when choosing between the different types of retirement accounts.
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