Roth vs. Traditional IRAs

It is the most common question we get from clients in their 20s and 30s: "Should I be putting my money into a Roth or a Traditional account?"

The answer, as with everything in finance, is: it depends on your taxes today versus your taxes tomorrow.

The Traditional IRA (Tax Break Today)

When you contribute to a Traditional IRA or 401(k), you contribute pre-tax dollars. This lowers your taxable income for the current year. Your money grows tax-deferred, and you pay ordinary income taxes when you withdraw the money in retirement.

• Best for: High earners who are in their peak earning years and want to lower their current tax bill.

The Roth IRA (Tax Break Tomorrow)

When you contribute to a Roth IRA, you contribute after-tax dollars. You get no tax deduction today. However, the money grows completely tax-free, and your withdrawals in retirement are 100% tax-free.

• Best for: Young professionals, early-career earners, or anyone who believes their tax bracket will be higher in retirement than it is today.

The Secret Third Option: Tax Diversification

For many of our clients, the optimal strategy isn't choosing just one. It's building "tax diversification." By having buckets of pre-tax (Traditional), post-tax (Roth), and taxable brokerage money, you give yourself massive flexibility in retirement to pull from whichever bucket is most tax-efficient in any given year.