+11 votes
by (4.5k points)
Hi pals!  I just can’t decide whether I should open a Traditional or a Roth IRA!Hi pals! I just can’t decide whether I should open a Traditional or a Roth IRA! I’ve read all the things online but still not sure  for reference, I’m 26, make 105k, and hoping to have my salary increased in the next few years by atleast 15-20k. Bonus question: Can I contribute for 2019 to a Roth IRA if I’ve already filed my taxes? Any advice is greatly appreciated!  
Hi pals!  I just can’t decide whether I should open a Traditional or a Roth IRA!

7 Answers

0 votes
by (1.9k points)
Roth for as long as you can.  
by (4.5k points)
@mendelian thanks! any particular advantages of this over traditional?  
by (1.9k points)
Tax rates are low now and are scheduled to go up. In Roth you pay taxes now and then it's tax free when you withdraw.  
+6 votes
by (3.3k points)
Why not both?  
by (4.5k points)
@palladino go halfsies?  
by (3.3k points)
@browne if you find yourself needing to reduce your taxable income you’ll have the option to do so. this year max out Roth, next year may change.  
by (6k points)
@palladino I did the same thing before going over the limit. It’s mostly because I don’t know if I’ll still have income come retirement.  
+1 vote
by (570 points)
Do a Roth if your taxes are done. and you’re contributing to 2019. It doesn’t impact your taxes for the year.  
by (4.5k points)
@plenum do a Roth for 2019 if my tax for 2019 is already done?  
by (570 points)
@browne yeah it won’t impact taxes because Roth is after tax money (in your bank now going into an account)
0 votes
by (390 points)
Roth until you can't, then backdoor Roth
+8 votes
by (2.7k points)
At 26, fund your Roth and see what happens with 40-50 years of tax free growth. Don’t try to play the tax arbitrage game, there is no reason to save a dollar on taxes today only to owe taxes on 5-6 times more in the future, and if I was to guess the direction of tax rates in the future. When you get in to your 50’s and 60’s there may be more value to that but you will probably have a large bucket of pretax money at that point from employer matches at a minimum. Get in to retirement with multiple tax buckets to better design your income and keep yourself under tax brackets.  
+1 vote
by (4.5k points)
Thanks everyone! I have opened a Roth account in Vanguard  
by (2.7k points)
@browne Great time to Buy!  
by (4.5k points)
@lacielacing i bought a bunch in my VTSAX last week with all my extra cash haha
by (2.7k points)
@browne Absolutely! No wrong answer in a panicked overeaction like that! I moved from 75/25 to 85/15 between Thursday and Friday. I wouldn’t be surprised to see it form a double bottom and go retest the lows. Another idea if you have any sidelined non-qualified cash is to convert a big chunk of Pretax to Roth while the market is down and use the cash to pay the taxes. Convert at the bottom and ride the market back up in the Roth. From a risk free ROI standpoint this can be pretty attractive!  
by (5.3k points)
Now don't forget to invest it!  
0 votes
by (1.8k points)
With your earnings trajectory, you may eventually disqualify for a Roth based on income cap. Don’t worry about it until it happens - just make sure you do your taxes on time, and you’ll have enough time to recharacterize to a traditional IRA. Silver lining there is that you then get that tax break.  
by (1.8k points)
For example I think for 2020 if your adjusted gross earnings is above $124k for single filers, you would not be allowed to use Roth. This is something that is not discussed much with Roth v traditional Ira. But again, you can recharacterize as long as you do it before the tax deadline in 2021.  
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