Solutions 4 Financial Independence: 06/26/18

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BRIDGEPORT, W.Va (WDTV)- Question: I am currently trying to max out my Roth IRA every year. Recently my company started a new simple IRA retirement plan and is matching 3%. Which one of these plans is the best to save for his retirement?

Answer (John Halterman-Beacon Wealth Management): “You said two words I really like and that is “free matching money” and of course “tax free money.” But you have to understand, those are two totally different things.

A Roth IRA is after-tax contributions. The big advantage is it is tax-free in retirement. Where as a simple IRA is money that is going to go on a pre-tax basis, grow tax-deferred and eventually it is going to be taxed to you. Of course the advantage is you are getting free employer money. That is a big deal.”

Question: Free money is always good, but which one is smartest for him?

Answer (John Halterman-Beacon Wealth Management): “I don’t think he has to make a choice. I think the reality of it is, and this is what I always tell people, you can’t run from free money. If your employer is matching you 3%, the very first thing you have to do is capture the free money. Put away at least 3% into it.

The next thing you want to do is continue to max out your Roth IRA. Obviously you are doing it because you like the tax-free money. Then if you have additional abilities to save, continue to put above the 3% into your simple IRA.

This way you were going to get both, you’re going to get free matching money and you’re going to be getting tax-free money. Any way you look at it, it is a big win.”

*Disclaimer: Distributions from Roth IRA are tax-free if qualified/when certain conditions are met.