The Retirement Account Mistake Millions Are Making (and How to Fix It)
Have you been feeling the FOMO (fear of missing out) from all those finance influencers hyping up Roth IRAs on TikTok and Instagram?
Well, I’m going to let you in on a little secret: The Roth isn’t always the best choice.
Why it matters? Because choosing the right retirement account could mean tens of thousands more for you in retirement.
What you’ll learn today:
The key benefits (and limitations) of the Roth IRA
When a traditional IRA makes more sense
How a regular brokerage account can supercharge your savings
Sound good? Let’s dive in.
The Roth IRA Isn’t Perfect
The Roth gets a lot of love for being tax-free in retirement with tax-deferred growth on your investment earnings. But not everyone qualifies due to the income limits. And even for those who can contribute, the tax savings may be overrated. No one knows what future rates will be—you could end up worse off paying today’s higher rates.
Your money is also locked up until retirement age unless you want penalties. Technically, you could withdraw contributions, but that means keeping meticulous records, which most people struggle with.
The Roth’s rigidity hampers things like early retirement or leaving a lump sum to heirs.
When the Trad IRA Is King
So why go with a traditional IRA instead? You get an upfront tax deduction for contributing. Juicy.
That means more money invested today and snowballing over decades. Come retirement, you could be in a much lower tax bracket and keep more of that growth.
Just imagine owing 22% now vs. 12% later on withdrawals. The trad IRA wins easily in that scenario. And if rates don’t drop much, you’re still deferring taxes on decades of gains.
Don’t Sleep on Brokerage Accounts
But what if you want full flexibility and access before retirement?
Then a regular brokerage account is where it’s at. You invest after-tax dollars but avoid ALL retirement account restrictions. No income limits, contribution caps, or required distributions.
Plus, your earnings get those sweet capital gains rates down the road. I’m talking 15% vs. regular income tax of 22%+! If you want to retire early, make large purchases, or acquire assets, the brokerage is ideal.
Wrapping Up
At the end of the day, the “best” retirement account depends on your situation.
Higher income? The trad IRA or brokerage could save you big over the Roth.
But if you’re in a lower bracket now, the Roth may still be tops.
The smart play uses a mix for maximum flexibility and tax planning.
So don’t blindly follow the Roth hype. Crunch the numbers and pick what’s right for YOU.
Not sure which route to go? Book a consultation with a qualified financial planner to build a tailored retirement strategy.
This material was generated using artificial intelligence (Claude AI) and edited by Evermont Wealth and Kaleido Inc. from information derived from sources believed to be accurate. This information should not be construed as investment, tax, or legal advice.