Savings & Pensions

Brief Analysis #554 - Would You Benefit from a Roth IRA?

Millions of Americans are saving for retirement in 401(k)s and Individual Retirement Accounts (IRAs). These tax-deferred accounts allow people to invest pretax dollars, but require them to pay taxes on their deposits and accumulated earnings at the time of withdrawal. By contrast, a Roth account allows individuals to deposit after-tax dollars, but withdraw the accumulated balances tax-free. Given that taxes on retirees will likely be much higher in the future — due to taxes on Social Security benefits and the cost of Social Security, Medicare and Medicaid — Roth accounts make sense for many taxpayers.