Financial advisor Darcy Bergen recently discussed the ins and outs of an IRA.

PEORIA, AZ / Most investors and potential investors have heard the term “IRA.” However, financial advisor Darcy Bergen recently explained many individual investors are shy to admit they don’t fully understand what the term means.

“Many people know that an Individual Retirement Account (IRA) is used for retirement,” Darcy Bergen said. “But they don’t know there are different types of IRAs, and some can work better for certain individuals than others.”

Bergen first explained that there are two types of commonly used IRAs. These include the Roth IRA and the Traditional IRA. Both are used as avenues to save money for retirement but contribution limits, taxes, and penalty fees can be very different. The major distinguishing factor between the two is that a Traditional IRA allows the investor to put pre-tax income toward the investment, so it can accumulate tax-deferred. The investor may end up paying a lower tax rate when taking the money out of the Traditional IRA than if they paid taxes when putting it in.

“Another major difference between the two is that the Roth IRA allows a person to continue contributing to the account after the age of 70.5,” Darcy Bergen said. “A Traditional IRA does not allow that. Roth IRA contributions can not be deducted from taxes, but they are free of taxes and penalties once the person reaches the age of 59.5.”

Darcy Bergen explained that the difficulty in choosing between the two is that a person cannot predict the future. An investor may choose a Roth IRA, because they expect to be in a higher tax bracket in the future. Their contributions to the Roth IRA are taxed, but capital gains are not taxed as the account grows. A person who is willing to pay taxes now and enjoy tax-free withdrawals in retirement may prefer a Roth IRA.

An investor may choose a Traditional IRA if they expect to find themselves in a lower tax bracket in retirement. The money they were able to save through the IRA could then be taxed at a lower rate. 

“Choosing between a Roth IRA and a Traditional IRA can be difficult, and it’s best to consult with a financial advisor before making a decision,” Dary Bergen said. “This person can help you determine which option will be best in relation to your current income and your expected retirement income.”

Darcy Bergen entered the investment business at the age of 24. He became a fiduciary in 2015 and started Clear Solutions LLC, DBA Bergen Financial Group in 2003. He was named one of the top 20 advisors in sales with the Midland National Life Annuity Division for five consecutive years. He is now completing a book on retirement investing. 

The Bergen Financial Group in Peoria, Arizona is an excellent source for information on retirement investing. This team has all of the expertise required to help you make the decision between investing in a Traditional IRA, a Roth IRA, or other options. 

“The most important part is that you start preparing for retirement now,” Bergen said. “The sooner you begin, the sooner you begin seeing the benefits. I urge investors as young as those in their 30s to begin planning for the retirement years. Together, we can create investment solutions that can greatly improve a person’s quality of life now and in the future.”

Investment advisory and financial planning services offered through Simplicity Wealth, LLC, a Registered Investment Advisor. Sub-advisory services are provided by Advisory Alpha, LLC, a Registered Investment Advisor. Insurance, Consulting and Education services offered through Bergen Financial Group. Bergen Financial Group is a separate and unaffiliated entity from Simplicity Wealth and Advisory Alpha.