Home Articles Tax Free Roth vs. Tax Deferred IRAs

Tax Free Roth vs. Tax Deferred IRAs

Depending on the type of retirement account that you have, distributions can have huge impacts on your income.

If you have a Traditional account, distributions count toward your taxable income. Raising your taxable income in retirement can negatively impact other areas of your finances, such as:

For most people with Traditional accounts, they have the plan of slowly drawing money out over time. Where the real problem lies is when a crisis hits and you need a large amount of this money.

For example, we had a client who came to us with an emergency need for $50,000. While he needed it for himself, many times people come to us needing this money for their children or some other type of emergency.

Since he had a Traditional IRA, we had to actually take significantly more than $50,000 out of his account to pay the taxes. This in turn caused his income to increase by a large enough amount that his Social Security was taxed and he got a letter in the mail a few years down the road that he was going to have to pay IRMAA.

If this client would have had this money in a Roth account, it would have been easy to get this money out and he would have suffered none of the consequences. Roth accounts are a great source of tax free income in retirement.


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Retirement planning involves a lot more than just managing your money. This show is the complete guide to planning for and living in retirement, helping families finish well. Host Hans Scheil will discuss a new topic every week ranging from Social Security and Medicare to IRAs and taxes. Follow along each week by downloading the corresponding chapters below for free! New episodes air: Finishing Well Schedule on Truth Network
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