Roth IRAs are hugely popular – but can be a bad choice for some retirees. What to know now before you invest

Another bonus? With Roth IRAs, you don’t have to take required minimum distributions (RMDs) when you turn 73, so you have tax-free cash at your disposal whenever you need it in retirement.

On the other hand, contributions to traditional IRA are tax-deductible. So you pay the tax later, when you withdraw the money in retirement. You can start making withdrawals at age 59 ½, but if you need that cash sooner, you’ll have to eat a 10% penalty and pay taxes.

Still, for some retirees, a Roth IRA, even though it provides tax-free income in retirement, may not be the best savings tool. Here’s what to consider before you invest.

When a Roth IRA may not be the best option

The main reason you might not want to consider a Roth IRA is if you’re currently in a high tax bracket. If you’re looking to reduce your tax bill for the year, then a traditional IRA could help with that by lowering your taxable income.

If you expect your taxable income to drop in retirement, you might want to benefit from those tax breaks now through a traditional IRA. On the other hand, if you expect to be in the same tax bracket in retirement, then a Roth IRA could still make sense.

Another consideration is if you plan on making charitable donations in retirement. With a traditional IRA, you can transfer money directly to an eligible charity through Qualified Charitable Distributions (QCDs).

With traditional IRAs, you’ll need to start taking required minimum distributions (RMDs) by April 1 of the year after you turn 73, and then by Dec. 31 each year onward. The amount you need to withdraw is based on your account balance from the prior year and your life expectancy.

You can use QCDs to take your required minimum distributions and avoid paying taxes at the same time. That’s because a QCD made from a traditional IRA is excluded from taxable income.

With a Roth IRA, there aren’t RMD requirements (but after you die, your heirs will need to take RMDs unless the money is going to your surviving spouse).

So, with a Roth IRA, you don’t get the same tax benefit from QCDs. If charitable giving is part of your retirement strategy, you may want to take advantage of the tax break on your contributions through a traditional IRA and then get a second tax break through QCDs.

Another issue worth considering is whether you’ll need that money before you retire. With a Roth IRA, you can withdraw the amount you’ve contributed — made with after-tax dollars — at any time without penalties or taxes. Keep in mind you can’t withdraw any gains you’ve made on your deposits until age 59 ½, without penalty.

That could be handy in an emergency, but it also makes it tempting to access that money for something else, like a vacation. The penalties and taxes that come with traditional IRAs could help keep impulse early withdrawals at bay.

Other considerations

For Roth IRA contributions, your exact contribution limit depends on your tax filing status and Modified Adjusted Gross Income (MAGI). And, if you make a lot of money, you won’t actually be eligible to make contributions.