Technically, if all is considered equal, a standard IRA and a Roth IRA will give you the exact same return after taxes. This is absolutely true, if you make one assumption. To get the same results, the tax rate has to be the same when you pay the tax before putting money into the Roth and when you pay tax taking money out of the standard IRA. If the tax rate is the same going in and coming out, there is no advantage to having one type of IRA over the other.
However, tax rates today (end of 2012) are nearly at historic lows. Income taxes are a pretty safe bet to go up, so the Roth becomes the clear winner.
You need to go to great lengths to get a Roth IRA. Once you have a Roth, even if there isn’t a lot of money in it, you can start buying property in the Roth and many other things to build your Roth fortune. If you have an adjusted gross income (AGI) of over $183,000 (married couple) you can’t create or fund a Roth IRA this year. If you are in that situation, call me, because there are a lot of things that can be done to lower your AGI, even in early December.
The standard IRA does have one advantage. The money you put in a standard IRA lowers your AGI. If you could lower your AGI to put yourself into a lower tax bracket, that could be significant. So, you almost have to run your taxes showing a standard IRA and a Roth to determine which is best for you this year.
Start thinking about year end tax stuff. What can you do to lower your taxes this year?
Have a great Thanksgiving. I am thankful for my associations with you. I enjoy working with hard working and creative business minded people who make things happen. It is always excited to hear what you are doing and think of how I can help you use the law to help you be successful. Let me know what questions you have that I can answer and be a good “tip” for you and others.
By Lee R. Phillips
United
States Supreme Court Counselor
LegaLees
Corporation
556 East
1400 South
Orem,
UT 84097
801-802-9020
