Roth IRA vs. Traditional IRA- Why You Need Both!

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Season 2, Episode #54 Not Me, But You! Podcast. "If you believe it will work, you see opportunities. If you believe it will NOT work, you will see obstacles." 

Complete your research and then get started! You have to take action in order to achieve your goals. Do these 3 basic things to get wealthy: 1) Buy/hold Bitcoin. "Save your money in Bitcoin." 2) Buy/hold assets like true high yield ETF's/dividend stocks/closed end funds (Like MSTY or OARK or ULTY etc). 3) Learn to sell simple options contracts (cash secured puts or covered calls). 

Your Traditional IRA is place you can roll your 401K or 403B money into FROM your previous employer, after you have severed employement. Rolling money from your 401K to a Traditional IRA is a NON taxable event(you don't want to personally take possession of the money- instead you want to transfer the money from one institution to a different institution). That way, once the money is in your Traditional IRA, you can control it and invest it in many more things than you can, if you leave the money in an account with your previous employer. Money/cash/profit accumluates TAX DEFERRED (meaning you pay tax eventually- when you withdraw from this account)  inside of Tradition IRA. 

With a ROTH IRA, the money/cash/profit accumualtes TAX FREE( as in zero tax). But you need to meet 2 conditions to withdraw the money TAX FREE: 1) Be age 59 1/2 or older. 2) Have had the account open for at least 5 years. 

What is a feature of both IRA accounts, is that gains (profit) can accumulate tax deferred in a traditinoal IRA and can accumualte TAX FREE inside of a Roth IRA. You can also sell simple option contracts INSIDE of an IRA account. You can also buy/hold dividend stocks INSIDE of an IRA and the dividends accumualte either tax deferred (traditional IRA) or tax free (Roth IRA). 

IRA accounts are a financial tool, you can use, to help accumulate wealth without paying/owing taxes along the way. 

I'm not a huge fan of leaving money in a 401k/403B account after you no longer work for that employer. The main reason? Your investments choices are limited inside a 401K/403B. The things that you can invest in, inside of the 401K/403B are pre-selected choices for you. If you roll the money from a 401K to a traditional IRA, you then have many more investment choices and you control the money rather than have a financial custodian holding your money for you at the 401 financial custodian company. 

When you reach a certain age (something like age 70 or 72) you are required to do RMD's (required minimum distributions) from your Traditional IRA. There are NO RMD"s for a Roth IRA. You can simply withdraw money whenever you choose to from a Roth IRA, after you are retired (or after you are at least age 59 1/2 AND you have had your Roth IRA open for at least 5 years). 

You can also do a Roth CONVERSION: which is moving assets from your Traditional IRA and transferring those assets into your Roth IRA. You can do this once per year and you will pay a one time tax in order to do this conversion. I suggest moving PART of your assets, multiple years in row as you do Roth conversions. 

You are permitted to have MULTIPLE Traditional IRA's and MULTIPLE Roth IRA's. But you need to stay within the yearly contribution limits. 

Have courage today, to pick one thing, and work on your dreams. We will talk again soon. 

I'm not a financial advisor. This podcast is for education/entertainment purposes only. You will need to do your own research and accept responsibility for the results of any money you choose to invest. I love using Schwab.com to buy/sell stocks/ETF's/closed end funds/options. Schwab has a very user friendly app/website and their customer service is excellent. I can easily get to speak to a human being whenever I have questions.