5 Ways Roth IRAs Help Retirees

The reduction in tax rates under the new tax law could make contributing to a Roth IRA more attractive even for those nearing retirement.

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Question: Which type of IRA -- a Roth or traditional one that allows me to deduct my contributions up front -- will be better for me if I'm retiring in a few years?

Answer: Part of your decision should be based on what you think will happen to your tax rate by the time you withdraw the money. If you believe your current rate is higher than it will be when you take withdrawals, then you may want to consider taking the tax deduction now (if you qualify to deduct your contributions) and paying the taxes when you tap the account in retirement. But there are several factors that could make it worthwhile to forgo the tax break today in favor of taking tax-free withdrawals from the Roth IRA later.

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Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.