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At first glance, it may seem like you must choose one or the other: a traditional IRA or a Roth IRA. But the answer is often a combination of both. Each account offers unique tax advantages depending on your current income, long-term goals, and overall retirement strategy.

In this episode of Money Wisdom, Jake Doser, CFP®, CPWA® and Nicholas J. Colantuono, CFP® break down the key differences between traditional and Roth IRAs. To get a clearer sense of your options, Jake and Nick recommend asking yourself these four questions:

1. What Is Your Current and Future Expected Income?

Before you can make any tax decisions, you need a basic understanding of your current and future income. Your ability to contribute to an individual retirement account, or IRA, depends on how much money you make.

For traditional IRAs, there’s no income limit to contribute, as long has you have earned income. But there is an income limit on whether that contribution is tax deductible. On the other hand, Roth IRAs do have income limits: starting at over $150,000 for single filers, or $236,000 for joint filers.

2. How Old Are You and When Do You Plan to Retire?

At age 73, you must begin taking required minimum distributions (RMDs) from tax-deferred retirement accounts. If you don’t need the money, those RMDs can become a serious tax liability. But between the ages of 60 and 73, you have a window of opportunity to do some unique tax planning. During this time, many people consider Roth IRA conversions to provide more control and flexibility.

3. What Is Your Tax Bracket and Filing Status?

A traditional IRA provides an immediate tax break, but you’ll owe taxes later on your withdrawals. Conversely, Roth IRAs allow you to pay taxes upfront and enjoy tax-free growth and qualified withdrawals in retirement.

If you’re currently in a higher tax bracket, a traditional IRA usually allows you to deduct your contributions and may be a better fit. But if you’re in a lower tax bracket, a Roth IRA can offer more tax savings in the long run.

4. What Are Your Financial Goals?

We’ve heard from many retirees who wish they would’ve contributed more to Roth accounts. That’s because it’s beneficial to have flexibility from tax-free accounts in retirement.

You can’t control the market, but you can control your income plan, your tax decisions, and your investment strategy. The earlier you start working toward your financial goals, the more confidence you can have in your long-term retirement plan.

Are you wondering if you’re ready to retire? Get your free Are You Ready to Retire? Starter Kit by texting “KIT” to 800-757-0436.