Graphic Taxes now or taxes later?

The traditional-versus-Roth trade-off

Long description of the infographic

Whether a traditional or Roth retirement account is right for you can depend on several factors, including which account type(s) you are eligible for, your current and expected tax rate and when you plan to take withdrawals.

Key Takeaways:

  • With traditional 401(k)s and traditional Individual Retirement Accounts (IRAs), you generally contribute pretax dollars and pay taxes on withdrawals.
  • With Roth 401(k)s and Roth IRAs, you generally contribute after-tax dollars and may take withdrawals tax free in retirement.*
  • Whether you may contribute to a traditional 401(k) or Roth 401(k) depends on what type of account(s) your employer sponsors.
  • Anyone with earned income may contribute to a traditional IRA, but contributions to Roth IRAs are phased out above certain income levels.
  • Which account is right for you may also depend on when you plan to take withdrawals, as rules vary among the account types.

*Withdrawals of earnings from a Roth account may be taxed and penalized if taken before age 59 1/2 or from an account that has been open for less than five years.

UBS Financial Services Inc. is in the business of establishing IRA accounts for clients and we get paid administrative fees such as account maintenance fees and also fees on investments in the account. For more information on how we get paid, please refer to our Understanding our Fees booklet available at ubs.com/understandingourfees, or ask your UBS Financial Advisor for a copy.

This content has been provided under arrangement with Napkin Finance®. It may have been modified to meet the specific needs of UBS. Napkin Finance® is not responsible for any errors in the content, or any actions taken in reliance on it. Please do not copy or excerpt this content without express permission from UBS. UBS and Napkin Finance® are not affiliated.

UBS Financial Services Inc., its affiliates and its employees are not in the business of providing tax or legal advice. Clients should seek advice based on their particular circumstances from an independent tax or legal advisor.

This is for informational and educational purposes only and should not be relied upon as investment advice or the basis for making any investment decisions. It has not been prepared with regard to the specific objectives, financial situation or particular needs of any specific person. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. Any opinions expressed are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or groups of UBS.

As a firm providing wealth management services to clients, UBS Financial Services Inc. offers both investment advisory services and brokerage services, which are separate and distinct, differ in material ways and governed by different laws and separate contracts. For more information visit our website at  ubs.com/workingwithus (PDF, 152 KB).

© UBS 2020. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS Group AG. Member FINRA. Member SIPC.