[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.amorusolaw.com\/blog\/considering-roth-iras-its-all-about-the-tax-burden-white-plains-ny-new-york-ny\/#BlogPosting","mainEntityOfPage":"https:\/\/www.amorusolaw.com\/blog\/considering-roth-iras-its-all-about-the-tax-burden-white-plains-ny-new-york-ny\/","headline":"Considering Roth IRAs? It\u2019s All About the Tax Burden","name":"Considering Roth IRAs? It\u2019s All About the Tax Burden","description":"There are many keys to your income after retirement, including travel plans? Or, what if your health care costs go up? If you are trying to decide between Roth IRAs and traditional retirement savings, the key is knowing if your retirement income is going to exceed your present income or not, according to USA Today […]","datePublished":"2018-07-31","dateModified":"2023-08-05","author":{"@type":"Person","@id":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/#Person","name":"Amoruso & Amoruso LLP","url":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/","identifier":5,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Amoruso & Amoruso LLP","logo":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","width":0,"height":0}},"image":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b022ad35e60cf.jpg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b022ad35e60cf.jpg","height":750,"width":1050},"url":"https:\/\/www.amorusolaw.com\/blog\/considering-roth-iras-its-all-about-the-tax-burden-white-plains-ny-new-york-ny\/","about":["Estate Planning"],"wordCount":471,"keywords":["IRAs","Retirement Income","Roth IRAs","Tax Planning"],"articleBody":"There are many keys to your income after retirement, including travel plans? Or, what if your health care costs go up?If you are trying to decide between Roth IRAs and traditional retirement savings, the key is knowing if your retirement income is going to exceed your present income or not, according to USA Today in \u201cWhy more people should probably use pre-tax retirement accounts instead of Roths.\u201dIf you think your income in retirement will be higher than it is right now, that\u2019s a reason to put retirement savings into a Roth IRA. However, if you\u2019re already saving for retirement and you expect to maintain the same lifestyle, you\u2019ll want to be sure your retirement income does not exceed your current income, because it\u2019s all about the tax burden.Comparing your current income as you are working to your expected retirement income isn\u2019t exactly an apples-to-apples comparison. Instead, you\u2019ll need to include calculations of your tax rates for IRA withdrawals and other taxable accounts. People often pay a lower overall tax rate on withdrawals from traditional retirement accounts than they pay on Roth contributions today\u2013even with a higher retirement income.To fully understand this, you\u2019ll want to understand the difference between marginal tax rates and effective tax rates. The marginal tax rate is the tax rate on your next dollar of income. For example, people say \u201cI\u2019m in the 22% income bracket\u201d\u2014that\u2019s their marginal tax rate. Then there\u2019s the effective tax rate, which is the total tax bill as a percentage of income. This number is always lower than the marginal tax rate.For every dollar you add to a traditional retirement account, you\u2019re reducing your taxable income and saving on taxes at the marginal tax rate. Every dollar saved in a Roth IRA account is effectively taxed at your marginal tax rate. You could have chosen to save it in a traditional IRA, but you chose the Roth.Here\u2019s an example: a single person who earns $60,000 annually is in the 22% tax bracket, after taking the $12,000 standard deduction. That single person needs to have an income of $195,105 in retirement to reach a 22% effective tax rate on a traditional IRA withdrawal.It works better for someone in the 12% income bracket. A man who earns $50,700 annually is right at the top of that 12% bracket, after taking the same standard deduction. He\u2019d have to withdraw $52,605 from a traditional IRA in retirement for it to be worth having a Roth IRA.This decision requires making correct calculations about how much you intend to spend in retirement.Reference: USA Today (July 8, 2018) \u201cWhy more people should probably use pre-tax retirement accounts instead of Roths\u201dFor more information on retirement,\u00a0 tax planning, asset preservation and estate planning, please visit my estate planning website."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Blog","item":"https:\/\/www.amorusolaw.com\/blog\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Considering Roth IRAs? It\u2019s All About the Tax Burden","item":"https:\/\/www.amorusolaw.com\/blog\/considering-roth-iras-its-all-about-the-tax-burden-white-plains-ny-new-york-ny\/#breadcrumbitem"}]}]