Traditional IRA or Roth IRA; Which is the best? The debate has become more relevant for millions of investors because the income limit for converting a Traditional IRA to a Roth IRA has been eliminated. Many experts take a side, but owning both kinds offers real advantages.

Spreading retirement funds across accounts that receive different tax treatment makes good sense. Diversification is a critical principle of do it yourself investment management. Owning both a Traditional IRA and a Roth IRA provides flexibility before and after retirement. 

Making Traditional IRA contributions makes sense in years your tax bracket is higher than you believe it will be in retirement, or during years you absolutely need the tax deduction. Roth IRA contributions make sense for those who are wealthy enough to make full contributions to all retirement vehicles (i.e. 401ks) and do not require the tax deduction.

After retirement, the flexibility of owning both kinds of IRAs is even more beneficial. In years of low income withdrawals can be made from the Traditional IRA at a low tax rate. Many seniors work during part of their retirement and can supplement their income from the Roth IRA without being thrown into a higher tax bracket. And unlike Traditional IRA withdrawals, money taken from a Roth IRA won’t count in determining whether any of your Social Security benefits will be taxed.

Money Management Tip: Make IRA contributions early in the year for unbelievable added earnings!