The Road Best Traveled: Roth IRA vs. Traditional IRA

A wooden walkway winds through a dense forest, surrounded by tall trees with green foliage. The path diverges into two directions at a fork, inviting choices of exploration. The ground is covered with

Summary

Choosing between a Roth IRA and a Traditional IRA is like picking between two roads: one where you pay taxes now for tax-free growth later (Roth), and one where you delay taxes until retirement (Traditional). First Service Credit Union offers both, with expert guidance to help you build a smart, secure retirement plan.

Two roads diverge in a yellow wood. . . .

Stay with me. This is a metaphor about retirement. One of these roads has a toll booth at the entrance. You pay upfront, and enjoy a smooth, carefree ride all the way to your destination. The other road lets you ride for free now but collects the toll when you arrive. This is, essentially, the difference between a Roth IRA and a Traditional IRA, and understanding which route is best for you can make all the difference.

The road where you drive now and pay later, that is the Traditional IRA. The money you put in to the individual retirement account is tax-deductible, lowering your immediate taxable income, but when you retire and start making withdrawals, every dollar is taxed like regular income and that tax rate will change based on federal tax laws. All of this to say, you probably won't be paying the same rate then that you are today. 

The Roth IRA is the other road, the one where you pay your toll upfront. Contributions are made with after-tax dollars, so they don’t lower your taxable income now, but they do allow for tax-free withdrawals in retirement. That includes not just the money you put in, but all the earnings and growth along the way. Whether your investments double, triple, or quintuple, you won’t owe a single penny in taxes on that growth. For younger earners or those expecting to be in a higher tax bracket later, the Roth offers significant long-term advantages. 
 
At First Service Credit Union, we offer federally insured IRA Savings Accounts and CDs, giving you a safe, secure way to grow your retirement funds. But if you’re looking for a broader range of investment options, First Service Wealth Management, in partnership with CUSO Financial Services, Inc.1, can help you build a non-federally insured IRA portfolio that includes stocks, bonds, and other assets. 

So, how do you decide which road to take? 

So, here’s the question for those of you who are standing at the crossroads: do you want to pay taxes now or later? Here at First Service, we offer both at competitive rates, and we’ve made the following chart to help you decide. 

🛣️ A Traditional IRA is the right road for you if any of the following apply. 

  • You expect to be in a lower tax bracket in retirement than you are now. 

  • You want an immediate tax break to reduce your taxable income each year that you contribute. 

  • You plan to retire soon, making long-term tax-free growth less of an issue. 

  • You don’t mind the required minimum distributions (RMDs), which force withdrawals at age 73. 

🛣️ A Roth IRA is the right road for you if any of the following apply. 

  • You’re just starting your career and earning less now than you will later. 

  • You expect tax rates to rise over time, making tax-free withdrawals more valuable. 

  • You want flexibility—Roth IRAs don’t require RMDs, meaning your money can grow indefinitely. 

  • You want tax-free inheritance options for heirs, who won’t owe taxes on Roth withdrawals. 


If seeing actual numbers will help you understand the difference between the two, First Service has a calculator that can give you precise numbers based on your income and savings plan.  
 
Still not sure which is best for you? Let’s build your retirement strategy together. Reach out to First Service Wealth Management for a consultation today, and one of our financial advisors can help you make sure your retirement is on the right path. 

[1]

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CUSO Financial")(“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor.  Products offered through CUSO Financial: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. The Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a Registered Investment Advisor or broker-dealer. Investment products, services and advice are only provided through CUSO Financial, a subsidiary of Atria.