Understanding ROTH IRA’s

Legal Minute with Cooley Shrair

SPRINGFIELD, Mass. (Mass Appeal) –  There are a number of taxed and tax-deferred accounts that can affect your life for years to come. Attorney Susan A. Mielnikowski  from the Law Offices of Cooley Shrair in Springfield shared more about ROTH IRA’s

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What is a ROTH IRA?

First enacted in 1998, a ROTH IRA allows an employee, or self-employed individual to take post-tax earnings and deposit them into a ROTH IRA.   Once in the ROTH, the  funds will grow, income tax deferred, and will be completely income tax exempt provided the funds stay in the ROTH for a minimum of 5 years, and the account holder has reached the age of 59 ½.

 How is this different from a traditional IRA?

In the traditional IRA, funds deposited to the IRA are taken as an income tax deduction in the year of contribution, so they are income tax exempt upon deposit.  They are allowed to grow, income tax deferred, until they are used.   Upon withdrawal, the growth will be subject to tax.  However, in a ROTH, since the initial funds deposited were post-tax dollars, meaning the individual did not take an income tax deduction in the year of contribution, the growth and distributions are income tax exempt.

Which one is better, ROTH or traditional?

We do not provide financial advice.  However, we can certainly help our clients understand the difference, and the income tax implications.  If you need to know assess which retirement account is better, it will depend on your age, your anticipated age of retirement, current interest rates, and many other factors.  However, certainly any savings for retirement is better than none.

About Cooley Shrair:
Cooley, Shrair P.C., founded in 1946 by Judge Sidney M. Cooley and Attorney Edward B. Cooley, is a progressive law firm located in Springfield, MA. Cooley Shrair provides unequaled service to its clients. Our unparalleled response time to our clients’ needs is the foundation of our mission statement.

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