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Which Is One Is Better For Me, A Roth IRA Or A Traditional IRA?

Financial Planning, financial advisor San Antonio Oct 3rd, 2022 by: Darryl Lyons

Part of financial planning in San Antonio, Texas, requires crafting a retirement strategy that includes Individual Retirement Accounts to help you save for a secure, comfortable future. As Texas retirement planning professionals here at PAX, we understand there are various types of IRAs to choose from, and each one has varying requirements, options, eligibility, and benefits. This can be confusing, so it takes expert advice to help you choose the suitable choice.  

We are here to help you understand the difference between traditional IRAs and Roth IRAs. Both have tax benefits, and in most cases, both should be a part of your retirement strategy.

When deciding between starting with a traditional IRA and a Roth IRA, it's essential to consider how current tax policies will impact each type of account. This article will help you understand the basics of:

  • How Roth IRAs and traditional IRAs differ 
  • Eligibility of IRAs versus Roth IRAs
  • The impact of taxes on both  types of accounts
  • How to select the right type of IRA for you

A lot of thought has to go into the strategy you use to maximize the accumulation and preservation of assets while minimizing the impact of taxes simultaneously. 


What are the key similarities and differences between Roth IRAs and traditional IRAs? 

A Roth IRA and traditional IRA are both tax-deferred retirement accounts that help you accumulate more assets inside the IRA. They're available to anyone with earned income and allow you to accumulate more assets for your golden years. 

So why would you choose one over the other?

The answer lies in how much you'll get from each type of account when it is time to withdraw those funds (based on how they are taxed). 

The traditional IRA provides multiple benefits. 

A traditional IRA gives you the ability to accumulate more assets for retirement due to its favorable tax treatment:

  • The contributions to a traditional IRA are tax-deductible, making them pre-tax.
  • Earnings (appreciation and income) inside the traditional IRA are not taxable.
  • Withdrawals of contributions, appreciation, and income are taxable as ordinary income when you start taking distributions.
  • There is a penalty if you begin taking withdrawals before age 59½.
  • You are required to start taking distributions at 70½.
  • There is another benefit if your tax rate during retirement is lower than your tax rate during your working years. Distributions are taxed at a lower rate. 
  • The 2022 annual IRA contribution limit is $6,000 (plus $1,000 if you are age 50 or higher). 

The Roth IRA is similar to the traditional IRA, but there are some important differences, primarily based on the current tax code. 

A Roth IRA also gives you the ability to accumulate additional assets for retirement due to its favorable tax treatment:


  • One key difference is you are contributing after-tax dollars into your Roth IRA. 
  • Income and appreciation accumulate tax-free inside the Roth IRA (similar to a traditional IRA).
  • The contributions made to Roth IRAs can be distributed tax-free (they have already been taxed). 
  • Distributions of appreciation and income are taxable.
  • Penalties apply for early withdrawals.
  • Roth IRAs also allow you to take tax-free withdrawals of your contributions (but not earnings) at any time.
  • The Roth IRA  has a 2022 contribution limit of $6,000 (plus a $1,000 catch-up allowance for people over age 50).
  • Because there are restrictions, some people decide to do a Roth conversion.

We recommend discussing your eligibility requirements, based on income and other considerations, with a financial advisor in San Antonio at PAX.  

Check your IRA eligibility to see if you are eligible to contribute to a Roth.

You can contribute the full amount in 2022 if you are single and your MAGI is below $129,000. If you earn more, your max contribution decreases as your MAGI rises to the max of $144,000. If you are married/filing jointly, your limits increase to $204,000 and $214,000.


Your tax bracket will determine which IRA is better for you

Believe it or not, your income is part of this tax-savings strategy! If your current tax rate is lower than what it will be in retirement, a Roth IRA might save you money. However, a traditional IRA could save you more money if your current tax rate is higher than what it will be in retirement. tax planning san antonio

The IRS has announced retirement plan changes for 2022, so it’s essential to know them and stay compliant. If it’s all too much to digest or consider, give our team of Texas retirement planning professionals at PAX a call to help you make the right decisions for your golden years. That’s what we’re here for—explore PIVOT RETIREMENT PLANNING™ with us!


Why does the Roth IRA work for most people saving for retirement?

If you’re in a higher tax bracket now than you expect to be after you exit the workforce, then the Roth IRA or a traditional IRA may work well for your retirement savings strategy. Both pre-tax and after-tax contribution strategies work better when your tax rates are lower.

Be aware there are no minimum distribution requirements for a Roth IRA, so it is possible that the account could continue accumulating assets after the required distribution rates that apply to traditional IRAs.

And there are zero age restrictions on distributions or contributions from a Roth IRA, which makes it unique compared to other retirement accounts.


Work with a financial advisor at PAX to select a traditional or Roth IRA

Now that you know more about the nuances that define traditional and Roth IRAs, you may want to know which one is best for your situation and goals. An experienced financial advisor at PAX can provide the answers and help you develop a personal strategy for asset accumulation and distribution. PAX advisors have the specialized knowledge to help you make the right financial decisions for you and your family.  

Before choosing a Texas financial advisor, take the time to find the right fiduciary advisor with the right background to help you grow and protect your wealth.

If you want to accumulate more assets for retirement and have questions about traditional or Roth IRAs, we recommend contacting the experts at PAX Financial. Our financial advisors in San Antonio, Texas, look forward to helping you decide which strategy is best for your situation. Schedule a no-obligation conversation with our team today!


Leave the guesswork out of retirement planning and tax planning in San Antonio, TX. PAX provides more than 100 years of combined experience helping busy people like you organize your financial life. 



*Biblically Responsible Investing (“BRI”), Values Based Investing (“VBI”) involves, among other things, screening for companies that fit within the goal of investing in companies aligned with your values, whether they are religious or secular. Such screens may serve to reduce the pool of companies considered for investment. Investing involves risk. BRI and VBI investing do not guarantee a favorable investment outcome.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.


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