If you can afford it and are eligible for both, having both types of IRAs allows you to choose between taxable and tax-exempt income when you finally make your withdrawals. Maintaining both types of IRAs, traditional and Roth, not only affects your taxes during retirement, but it can also allow you to save taxes today. Contributions to a traditional IRA backed by Gold can reduce your taxable income, making you eligible for a number of tax credits. If you don't qualify for a Roth IRA due to income limits, some investors choose to make contributions to a traditional IRA backed by Gold and then convert them to a Roth IRA. Consider the tax advantages and implications of both types of IRAs and remember that there are income limits for contributing to a Roth IRA.
In other words, your traditional IRA may provide a short-term tax benefit, while your Roth IRA offers another long-term tax benefit. If your income is relatively low, a traditional IRA or 401 (k) may allow you to receive more contributions to the plan as a tax credit for savers than you would save with a Roth. To get even after-tax savings, you must be disciplined enough to reinvest the traditional IRA tax savings you earn each year in your retirement savings. Therefore, current and future taxes must be taken into account when investing in both a traditional IRA and a Roth IRA.
With a traditional IRA or 401 (k), on the other hand, the income required to contribute the same maximum amount to the account would be lower, since the account is based on pre-tax income. Having a traditional IRA and a Roth IRA could allow you to enjoy a tax deduction this year by contributing to the former and making future tax-free profits with the latter. You can avoid RMD by transferring a Roth 401 (k) balance to a Roth IRA after you retire, but before you reach RMD age. In the meantime, you can continue to receive tax deductions by making contributions to the traditional IRA every year.
If you create a traditional IRA and a Roth IRA with the same broker, keep in mind that both accounts will reside in the same online login. If you don't name a beneficiary, your spouse (if he is your primary beneficiary) can choose to inherit your Roth IRA or transfer it to a Roth IRA in your name. The classic 401 (k) plan offered by most employers offers the same tax benefits as a traditional IRA. When it comes to saving for retirement, Roth IRAs and traditional IRAs are some of the most popular ways to do so.
If you change jobs, you have the option of converting a traditional 401 (k) directly into a Roth IRA without having to convert it into a traditional IRA first.