Retirement Planning/Traditional IRA


I am a retired teacher and have a small Traditional IRA.  When that first money was placed into my IRA, was it before payroll taxes or after?  I was teaching at the time.
I now work a part time job and have already added some money to this same IRA.  I know this last money was after payroll taxes.  
Should I continue to contribute to this traditional IRA or should I open a Roth IRA?   Thank you.

IRA contributions affect only income tax, not payroll taxes.  ALL contributions are pre-tax regardless of the source or timing of the funds, as one deducts the total contribution upon filing one's tax return.  Because no income tax has effectively been paid on Traditional IRA contributions, distributions are taxed as ordinary income on both principal and earnings.

The existence of your current IRA has no impact on your decision about the methods of future retirement savings.  Future plan contributions should be made according to your planning objectives and tax situation.  In most cases, provided you are eligible, you should be placing any individually invested retirement assets into a Roth IRA for the tax-free earnings, up to the annual contribution limit.  The first priority for your retirement savings, however, should be into an employer-sponsored plan to the degree that your employer's matching contribution is maximized.  In other words, take any free money that is available (matching contributions), then save on a tax-free basis (Roth IRA), then tax-deferred (Traditional IRA and further employer plan contributions).  Once you have exhausted all IRS tax-qualified options, you can seek further tax deferral through general securities (stocks and bonds) or annuities.

It also may be appropriate to convert your Traditional IRA into a Roth.  You will pay income tax on the amount of the conversion, but it will then continue to grow tax free.  Most financial planners or advisors can calculate whether or not a conversion makes sense mathematically.  Assuming that you are eligible to do so, this calculation is the only relevant issue in the decision.

If you need further clarification or need to meet with an unbiased advisor who can work though these issues, please contact us at

Rob Drury
Executive Director,
Association of Christian Financial Advisors

Retirement Planning

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Rob Drury


Retirement planning, tax qualified retirement plans (401(K), IRAs, etc.), mutual funds, insurance used in retirement planning, estate planning (tax planning, transfer of assets, creditor protection).


Comprehensive financial planner, 14 years; Executive Director, Association of Christian Financial Advisors, the nation's largest nonprofit financial planning network. Financial writer and frequent contributor to journalists and media sources.

Association of Christian Financial Advisors (Executive Director), National Association of Insurance and Financial Advisors (NAIFA).

BBA, MAS; Securities licenses, FINRA Series 6, 63, 65, 22

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