Chandler, AZ

Gilbert, AZ

Roth IRA made simple for the Chandler AZ
September 27, 2012

Roth IRA made simple for the Chandler AZ

A simple tax analysis of a Roth IRA and its features for Chandler AZ and the surrounding area.

Often I find clients asking what is better a Roth IRA or a Traditional IRA. To start the series on the topic I figured I would discuss a Roth IRA and some of its pros and cons.

The basics of a Roth IRA-

A Roth IRA is funded with money after taxes have already been paid. This is the fundamental difference between it and a traditional IRA. When I say it is funded with post tax money I mean that funding a Roth IRA has no impact on your taxes in that tax year. A Traditional IRA on the other hand is a tax deduction in that year but we will discuss that later.

The other fundamental difference between the two IRA products lies in the withdrawal phase. Both take place after 59 & 1/2 however a Roth IRA and any growth it has experienced during its time in the fund is disbursed tax free. A traditional is taxed as the money is taken out.

What does this mean? Basically the IRS gives you an option with IRA products pay taxes now or pay them later.

Positives of the Roth Product

As I mentioned the main advantage people gain from a Roth IRA is the fact the gains on the money can be taken out in retirement tax free. This means if an individual deposits 5000 a year for 10 years (50,000 dollars) and experiences a total of 50 percent growth over the years taking the funds to 75,000 dollars then the 25,000 in gains is never taxed.

IRS Publication 590 has the detailed explanation on the IRA as well.

These are just a few of the simple facts about Roth IRAs, contact us for more information.  Also stay tuned for more information on various tax topics.


Ryan Stone

Ryan Stone has been an Enrolled Agent (EA) for 3 years and has worked in the accounting industry for 5 years. He specializes in individual and small business taxes plus tax mitigation.