April 10, 2014

Cover Story

Utah Innovation Awards


Featured Articles

Fighting the Cancer Battle

Tried and Tested


Business Trends
Rise to the Challenge

Fire, Ready, Aim!

Economic Insight
A Diversity of Gifts

Living Well
Quick Escape

Legal Briefs
Who’s the Boss?

Lessons Learned
From Unlimited Vacation to Unlimited Productivity

Money Talk
Weighing the Costs

Shauna Sloan: Growing Kid to Kid from Concept to 100 Stores

Patti Case: Helping Businesses Go Green

Special Report
2014 Legislative Session

Reader's Choice
Salt Lake Power Yoga: Bringing the Heat Since 2012

Tech Tune Up

Around Utah
Salt Lake Area

Around Utah
Utah Valley

Around Utah
Southern Utah

Around Utah
Wasatch/Summit Area

Around Utah
Northern Utah


Industry Outlook
Advertising and Marketing


Weighing the Costs

The Superior Retirement Account: Traditional or Roth?

By Lon Jefferies

April 10, 2014



Higher Tax Bracket in Future

On the other hand, if the investor was in the 15 percent tax bracket this year but expected to be in the 25 percent bracket during retirement (potentially a young employee expecting his earnings to rise), paying taxes now at 15 percent would allow $850 to be invested, which after 10 years of 8 percent growth would be worth $1,835 tax free.

Higher Tax Rate in the Future




Initial Tax Bill (15%)



Invested Amount (after-tax)



Future Investment Value



Future Tax Bill (25%)



After-Tax Value in 10 Years



Roth Advantages

What if you expect to pay a comparable tax rate both now and in the future? A Roth account offers several advantages in this scenario. First, as taxes have already been paid on a Roth account, the government doesn’t require investors to take required minimum distributions (RMDs) from these accounts, whereas RMDs are required from traditional retirement accounts beginning at age 70½. Without RMDs, Roth accounts can grow tax free for the investor’s entire lifespan. Additionally, upon death, Roth accounts pass to an investor’s heirs without any tax liability, while those who inherit a traditional retirement account must pay taxes on the assets.

Second, money withdrawn from a traditional retirement account before the investor is 59½ may be subject to a 10 percent penalty. Yet contributed funds to a Roth account (but not the growth on the contributed funds) can be withdrawn at any time without penalty. While withdrawing funds before retirement isn’t advisable, the added liquidity of the Roth account can prove useful in emergencies.

Finally, even if your income is expected to remain constant, investing in a Roth account allows you to lock in your taxes at today’s rate as opposed to taking the risk that national tax rates might be raised in the future.

If you’re unsure how your future tax bracket will compare to your current rate, diversify. Nothing prevents you from having both a traditional and a Roth retirement account. This not only allows you to hedge your bets, but puts you in a position during retirement to take distributions from your tax-deferred account in low-income years and from the tax-free account in years when you are in a high tax bracket. 

Lon Jefferies is a fee-only certified financial planner with Net Worth Advisory Group.

Page 12
Utah Business Social
UB Events View All
Best Companies to Work For 2015Utah Business Event
Dec 10, 2015
Utah Business magazine is thrilled to announce the 2015 Best Companies to Work for Event! This y...
Community Events View All
Empowering Self and Others: Become and Awakener
Dec 1, 2015
Uncover the secrets of empowerment. Whether you are a parent, a teacher or a Coach, you’ll find ...
Secrets to Financing your Business
Dec 1, 2015
Register: https://www.eventbrite.com/e/december-1st-secrets-to-financing-your-business-tickets-19...

info@utahbusiness.com  |  90 South 400 West, Ste 650 Salt Lake City, Utah 84101   |  (801) 568-0114

Advertise with Utah Business

Submit an Event

* indicates required information
* Event Name:
Price (general):
Website (if applicable):
Coordinator's Name:
Coordinator's Email:
Coordinator's Phone:
Venue Name:
Venue Address:
Venue City:
Venue Zip:
Event Capacity:
* Event Description: