Roth IRA Versus Traditional IRA, Which is Right for You?

3 things to consider when deciding between a Roth IRA, Traditional IRA and a Roth Conversion

When planning not to run out of money in retirement, there is a lot more to consider than the current year’s tax deduction, which is the most common method for people preparing for retirement. 

What are the vehicles and how do they work?

Individuals who are determining how invest for retirement are often proposed 2 options:  Roth or Traditional Retirement Accounts.  These 2 options usually come to the forefront of retirement planning because of the tax incentives that are associated with each.  In this blog I will address the 2 types, a loophole in the IRS code, as well as the 3 things to consider when trying to determine the right option for you and your plan.

What is the difference between ROTH and Traditional?

When discussing both types of accounts, we must identify that these accounts can be either in a employee sponsored 401k or an Individual Retirement Account (IRA).  The basic tax benefits are the same with a few slight differences in contribution limits as well as the 401k not having income limitations like the IRA.  If making the decision in a 401k, although some of the nuances are different, the tax rules and considerations are the same. 

ROTH is an account that is available to US taxpayers to help them ready for retirement.  There are some basic differences that the ROTH has versus the traditional. 

Traditional IRA is also an account that is available to US taxpayers as an alternate way to prepare for retirement.  Traditional IRA’s are treated differently by the IRS than its ROTH counterpart.

For both plans, they follow the same contribution limits.  The maximum annual contribution for 2020 is $6000.  There is a special catch-up contribution that you can make if you are over the age of 50 in the amount of $1000, totaling $7000 for individuals over 50 years of age.  until the participant reaches the age 59 ½.

NOW - What are the 3 things to consider when choosing which is right for you

1. Longevity – Taxes is the biggest wealth killer in your plan.  So you may have to use more than you think you will, especially if taxes are higher in the future.  Given the deficit and all that is going on with COVID-19, do you feel taxes will be higher, the same, or lower in the future?  Before we get into forecasting, let’s take a look at how taxes work on the money you earn, in a very basic format.  We have a tiered tax system, meaning that your tax rate changes as you go up in tax brackets.  If we look at 2020 tax brackets on that money, if you make $200,000, then your taxes will look something like this if you file married:

$0-$19,750 @ 10%

$19,751-$80,250 @ 12%

$80,250- $171,050 @22%

$171,050 - $200,000 @ 22%

What that means is you pay a different rate as you go up in earnings, you don’t just jump up to 22% on all $200,000.  When you look at retirement, if you need to have $200,000 in order to pay your lifestyle, how do you get that money?  If you are taking social security plus all tax deferred retirement accounts, all of your income is taxable, and you have to take more out on an annual basis than you thought. 

But what if you had another account, like a ROTH.  That leads us to…..

2. Weighting - How much you currently rely on your tax deferred dollars?  In the above example, what if you could save the 22% on the $28,950 (200,000-$171,050) on an assumed distribution in 2020?  Then in retirement, you have to pull out $6,369 (the 22% taxes on $28,950) less that can stay in your tax deferred account.  Those are the dollars that we want to pull out in the lowest brackets, saving you on taxes.  If you are contributing to a retirement account, these tax brackets play a huge role in how much to contribute to a traditional account. 

A different way of looking planning which retirement account to contribute to is to consider the future possible tax rates.  If we are at 22% on those dollars in 2020, what if rates go back to the year 2000’s tax brackets.  If you take a 22% break today, to pay a future rate that mimics 2000, then your tax bracket would be $132,000-$200,000 @ 36% tax rate.  That’s 14% additional in taxes.  Perhaps taking the break today in the current environment may not be as beneficial as you thought?  The good news and bad news……the current tax rates are due to sunset in 2025, meaning in 2026 we go back to the same brackets in 2015 or a new tax bracket based upon that future administration.  Good news is to take advantage of the low taxes today, bad news is that those rates are not here forever.  In the future, taking the deduction may be more appealing.  So how can we contribute to a ROTH IRA considering above you had mentioned we cannot if we make too much money?

ROTH Conversion – The IRS has a loophole that allows you to take existing IRA dollars and convert them into a ROTH account, paying the taxes today for future tax-free distributions.  Something that you should consult your financial advisor and tax advisor to see if it makes sense for your plan.

3. Inheritance – The SECURE Act was passed in December of 2019 and changed the inheritance rules around IRA’s.  (Currently, and in the past, the spouse can inherit the IRA and use it as though it is theirs, so this does not apply to a spousal inheritance).  In the past, a beneficiary, or the person that inherits the IRA, could take distributions based upon their life expectancy, depending on how old the decedent was at time of death.  This was called a stretch-IRA, which allowed the beneficiary to draw down dollars under circumstances that could be more tax advantageous than their other 2 options; draw down in 5 years or take in one lump sum.  Under the current rules, a beneficiaries longest stretch option is only up to 10 years to take the distributions to bring the account to $0.  If that is a child with an already high income, those dollars get added to their current income level, possibly giving more to the IRS and less to that beneficiary.  From an inheritance standpoint, tax deferred dollars are the worst to leave behind.

There is a lot to take into consideration when planning for retirement.  If you have any questions on how to plan for your retirement, please reach out to schedule a free consultation with Bobby.  If we are a fit for one another, we can help you to determine a map through your retirement to help you meet all of your goals and make your dream retirement a reality.   

2023 Mid-Year Commentary

5 Things to know about the Market at mid-year:

  1. The S&P is up over 13% midway through the year after being down 20% in 2022.  We believe the market is forward pricing, not backward looking, so expectations are improved.
  2. Inflation has improved, and there will be a lag of how this quick rate rise will ultimately play out. However, this is a well expected pause for the Fed on raises.
  3. Recession fears are tough to agree with given the strong labor market and consumer strength.  AI (artificial intelligence) is all the big buzz.  We anticipate this as a positive for the job market, not as a damper.
  4. There is still a ton of cash on the sidelines and the consumer has buying power.
  5. China and Russia are concerns, but geopolitics will forever be a concern as long as there is an economic race to win.  We must play the game knowing that rule.

Our industry tends to create optimists (bulls) or pessimists (bears).  Both are looking for opportunity in one direction or the other. The bulls are more often right, as we have more up markets then down.  However, when we have a down year, like 2022, the bears can make a lot of noise.  As we always say, fear sells, so if you want to stay engaged with fear, keep watching cable news.  However, it is tough to contend with the fact that this year is off to a tremendous start as we close in on halftime.  The S&P 500 is up over 13% as we write this, inflation is coming down, and all of this is in the face of bank failures, debt ceilings, and recession fears. 

While sometimes people confuse the market for a reflection of how the economy is doing, it is really a reflection on the expectations of investors.  At the beginning of the year, investors expected the economy to be in deep recession by now, and that did not come to fruition.  Everyone got a bit too pessimistic, and the rally has been the product of those investors being forced to revise their pessimism to a more optimistic view.

We may still have a recession later this year, but the rally has helped shift eyes from worrying about lower lows to thinking we might see higher highs.  This is part of the reason we continue to be optimistic about the market looking forward.  Many investors looked at cash yielding over 4.5% at the end of last year and felt that was the best place to be.  Of course, fear and greed play a powerful role in the direction of the market, and right now a lot of professional investors are fearful that the market will hit higher levels and they will be left out as they sit in cash. 

We were not as tempted as others to shift into high yielding money markets last year.  We saw too much opportunity in investments that had much better long term return prospects.  We felt strongly that large, cash generating technology stocks had been unfairly punished by inflation concerns, and we now see those stocks leading the market higher with a focus on cost reduction and exciting innovations in many areas such as artificial intelligence.

We also saw fixed income investments that offered returns in excess of 10%, and we have high confidence that they will pay their yields and return their principal.  We remember people asking about money market rates and suggesting that as a safe haven, and our general response was “why earn 4.5% if we can earn more than twice that?”  While cash always has its place in people’s portfolios and balance sheets, it is our job to find better investments than money market funds. That dedication to finding better investments with significantly higher interest rates and short durations has had a tremendous positive impact on client portfolios.

As we look forward, we actually expect much of the same:

One important difference for markets now versus the last 15 years is that the Federal Reserve’s interest rates are now relatively high.  Since the financial crisis, the only stimulative measure the Fed could take was quantitative easing, or QE, since interest rates were at zero.  Now that interest rates are over 5%, should the economy faulter, the Fed has plenty of room to cut interest rates, helping to slow any declines in stocks and give a boost to bonds.

So, what could go wrong?  While we still think there are potential cracks in the banking system and commercial real estate, we feel most of those risks have plenty of focus and should be able to be managed without causing a crisis.  The real thing that goes bump in the night for us is concern over the relationship of China and the West.  This will certainly add some volatility to markets, and this should remind everyone that a disciplined process is key in an environment with so many unknowns.

But worry not, it is our job to stay up late contemplating all the risks in the world, to your investments, and your overall financial plan.  If you have questions, we want to hear them.  As always, we will continue to send updates both on a mass level like this note and a personal level to those we work with and help invest for. 

In the meantime, enjoy your summer, and congratulations to all the graduates this year!

Bobby, Jordan, and the Green Ridge Wealth Planning Team

Green Ridge Wealth Planning is an SEC registered investment adviser. The information presented is for educational purposes only. The information does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Green Ridge Wealth Planning has reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment, or client experience. FIRM NAME has reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the adviser’s ADV Part 2A for material risks disclosures. Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, nature and timing of the investments and relevant constraints of the investment. Green Ridge Wealth Planning has presented information in a fair and balanced manner. Green Ridge Wealth Planning is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.

Executive Assistant

Green Ridge Wealth Planning

Montville, NJ

Green Ridge Wealth Planning is an independent financial planning and business consulting firm of licensed fiduciaries who work keeping our client’s best interests in mind to help guide them toward making the right financial decisions so they can reach their life goals. We advise in investments, taxes, property, retirement plans, loans, budgeting, estate planning, and wealth accumulation strategies but do not sell investment products. We also consult business owners to assist in creating a self-managed business. Clients who join the GRWP family receive white glove service.

Job Description:

We are seeking a full-time, seasoned, and detail-oriented Executive Assistant to support our CEO/Franchisee, CIO, and other members of our team. Ideally, someone who has an entrepreneurial spirit, is forward-thinking, and thrives in a fast paced, constantly evolving work environment.


Salary and Benefits

April Commentary

April 2023 Commentary

As the second quarter of 2023 gets underway, we thought some commentary highlighting the current state of the market would be helpful. We find it useful to identify the themes we think are important and monitor those themes as the year progresses.  

Before we jump into the themes, it is important to point out that the S&P 500 was up over 6% through the first quarter of 2023!

One of the major drivers of the positive return this year has been technology, while defensive and value sectors of the market have underperformed. This change in market dynamic reflects a positive shift in investor sentiment as factors that caused volatility throughout the last year have shown signs of normalizing.

There have also been new concerns that have emerged to start the year as failures among regional banks sent shocks through investors who were bracing for a wide scale banking issue. Luckily, the banking failures seem to be isolated, and the risk of a "contagion" seems low.  Some of this is due to the specific nature of the banks that ran into trouble, as well as the emergency efforts to restore confidence in the banking system by regulators and government institutions. 

When considering the factors that have contributed to the market’s resilience and ability to bounce back after the correction we saw in 2022, we look at themes such as inflation, the labor market, and consumer spending.  All of these factors have the potential to change direction, and the financial stability in the banking system is still something to keep an eye on, but it is worth just acknowledging the current trends and expectations. Inflation One of the Federal Reserve’s core missions is to achieve price stability…or more specifically, bring inflation down to a rate of 2%. Although the inflation rate remains well above the target rate of 2%, we have seen notable improvement as we look at the progression of inflation over the last few months:

November 2022: 7.1%
December 2022: 6.5%
January 2023: 6.4%
February 2023: 6%

As you can see in the speedometer above provided by our friends at City National Rochdale, the current outlook for inflation is neutral with a tilt towards the negative end. While we are encouraged by the direction inflation is moving, there is still ground to cover to get to the Federal Reserve's target. High interest rates and tight financial conditions will continue until the Federal Reserve feels they have a handle on inflation.

The Labor Market
A low unemployment rate is one of the hallmarks of a healthy economy. As we look at the recent labor market data, we are encouraged by the resilience we are seeing. 

December 2022: 3.5% unemployment
January 2023: 3.4% unemployment
February 2023: 3.6% unemployment
March 2023: 3.5% unemployment

For some context on the above numbers, the average unemployment going back to 1948 has been 5.73%. The current rate of 3.5% is near an all-time low.

The current outlook for the labor market as outlined above is neutral with a lean towards positive. While unemployment remains at a historically low level, the number of jobs being added to the economy per month is decreasing, as is the growth in employee wages. Overall, we believe the labor market is strong which increases the possibility of the fed pulling off a "soft landing" which refers to their ability to tighten financial conditions without inducing a significant recession.

Consumer Spending
Consumers are the largest driver of the U.S economy and their spending habits have a large impact on overall economic activity. Consumption accounts for around 68% of the GDP (Gross Domestic Product) calculation. While most think of a rapidly growing GDP as a sign of a healthy and booming economy, it can also contribute to the inflation issue. If consumers are spending at record levels, demand for goods will be higher, which in turn can make it harder for inflation to moderate. 

As we look at the PCE index (personal consumption expenditures) we can see that consumer spending is continuing to grow over time, but at a slower rate than it was previously. This may be the sweet spot that allows inflation to moderate while stimulating the economy enough to avoid a significant recession

The current outlook for consumer spending as outlined above is neutral. While it is ideal for consumer spending to be increasing at a slower rate, there is risk for it to start trending in a negative direction month over month if financial conditions continue to tighten. An example of financial conditions tightening further would be if the Federal Reserve continued to raise rates throughout 2023.

The economic themes outlined above all seem to be progressing well, as can be seen in the reaction of the market. However, in the near term, we do expect more volatility as new data comes in and the Federal Reserve weighs its options. There are still many opportunities to be found in the market between high yield structured notes, equities that have fallen way off their all-time highs, and low risk securities like CDs and money market funds providing attractive yields.

We hope this commentary provided some context on the state of the market! Please feel free to reach out to our team if you have any questions.

Cash Management: How to Make the Most of your Savings in the Current Environment

It is no secret that the stock market has experienced a great deal of volatility since the start of 2022. The declines we have seen in the markets recently have created an appealing opportunity set among both equity and fixed income securities. With prominent indexes like the S&P 500, NASDAQ, and Barclays Aggregate Bond Index all trading at significant discounts compared to where they were in late 2021, we think it is a great time to be invested to capitalize on potential upside. However, the current environment has also made investors rethink how they are treating excess savings with the reemergence of attractive rates among Money Market Funds, Certificates of Deposit, and Treasury Bills.

One of the largest headwinds we have been facing in the economy over the last 18 months is an abnormally high and stubborn inflation number that has eaten away at consumers purchasing power. This has forced the Federal Reserve to react by increasing interest rates, thereby slowing the economy and inflation. A positive byproduct of these rate raises is a market that is now rewarding investors for lending out their money. By utilizing vehicles such as Money Market Funds, CDs, and Treasury Bills, investors can earn annual interest in excess of 4% without experiencing the volatility of the equity market.

The chart above demonstrates how the federal funds rate has changed over the last 1 year. After the most recent .25% rate hike this month, the federal funds rate sits just below 5%. The cash management vehicles discussed above such as Money Market Funds, CDs, and Treasury Bills tend to have yields in the same ballpark as the federal funds rate.

While moving funds out of equities or high yielding fixed income instruments into these traditionally safer vehicles is not generally advisable after a downturn, it has become an attractive opportunity for investors with cash stockpiled in low interest bank accounts that are looking to avoid the volatility of the market. This approach to cash management when utilized on savings in excess of 3-6 months of living expenses can be a great way to earn some interest on funds that are sitting on the sideline.

Structured Notes

For those willing to take on a bit more risk in their cash management strategy, structured note products can be utilized or combined with the vehicles outlined above to achieve a higher overall yield. Creating a combination of notes and treasury like securities can be another great way to earn competitive returns on cash that would otherwise be earning very little in a bank account. Equities remain the space with the highest overall return potential, especially after the downturn we have experienced, but there are now other ways to take advantage of the current environment.

Feel free to reach out to our team if you have any questions about cash management or investments in general.

Market Commentary 2/23

Wow, what a start to 2023!!  After an extremely challenging year, we are seeing a very different type of market as we shed some of the concerns that drove the market lower in 2022.  Inflation is cooling, the Fed is nearing the end of its rate hike cycle, China is coming to its senses, and Europe seems to be managing through the winter with the conflict in Ukraine.

Investors who held in there are starting to see some recovery after the carnage of the last 12 months.  The last year though has really been a tale of two halves;

  1. The first six months of 2022 were nothing but a straight slide down.  Everyday we saw more red and continued declines.
  2. The last 6 months of 2022 were choppy, but generally flat.  The real turning point was a slight tick down in inflation, and from there, the market tried to see past the economic weakness, Fed policy, and other difficult headlines that seemed to roll in every week.

With the big rally we saw in January, the last 6 months are starting to look downright good.  I know that sounds crazy, but the numbers don’t lie.  And with market strategists at major financial institutions still predicting a difficult year for markets, it begs to wonder if the recent strength can hold together or if we are just setting ourselves up for another slide down.

And there lies the main question on every investors mind; are we going to see a bounce back in the market in the near term, or are we going to have a prolonged downturn that continues to turn account values and stomachs.

We at Green Ridge are bullish!  “Why?”, you might ask.  While we don’t have a crystal ball, we do have eyes and ears.  What we see is more and more indices, sectors, and individual stocks starting to develop bullish patterns and upward momentum.  Take a look at the general technology sector.  Beat down over 27% last year and up almost 10% on the year.  What we hear is continued skepticism from wall street professionals.  That contrarianism is just the same as when markets are boiling over.  It goes too far before all the institutions that are currently skeptics become frantic buyers if they have a change of heart and move to the bull camp. Both of these things can change on a dime, but history has taught us to trust our eyes more than our ears. 

So, what do you do?  We think it always makes sense to remain level headed and stick to your long term strategy.  There are opportunities in the market right now all over the place, and while all of those opportunities might not make sense for you given your risk tolerance and time horizon, we see a solution for all types of investors.  If you are having trouble seeing them, or feel like you want to learn more about what we are seeing and why we feel so optimistic, give us a call!  We love gabbing about this stuff!!!

Hang in there, and know that there are brighter days ahead.  Maybe not tomorrow, but then the day after that!

Bubbles and Overvaluations??

We were all so happy to get out of 2020, we didn't realize that we stepped out of one crazy cab and into a train wreck!  Can't we have a slow news cycle for 1 month?

With a strong stock market that threw many for surprise in 2020, we think people are underestimating the return potential in 2021.  Look how bad the news cycle has been on a political front, botched vaccine roll out, increases in lock down measures, and so on, yet the market shrugs it all off.  In fact, technology, small cap stocks, and emerging market stocks had a great start to the year (coincidentally our tactical investments).

We now hear a lot of concern over bubbles and valuation.  We appreciate these concerns, and using traditional metrics, it is hard not to have that concern.

However, as we discussed in our webinar, we live in a digital age, and we are just entering a phase of exploring the real potential to what that means.

In particular, we would point to a few things that are difficult to measure in a digital age and with significant innovation:

1) inflation:  the impact is lower prices, but not because of lower demand.  As we use resources more intelligently, become more informed and smarter consumers (both individuals and corporations), and find better and cheaper ways to solve problems, prices go down.

2) GDP: usually measured by consumption, GDP goes lower if prices go lower.  If we consume the same amount year over year, but buy it at a 10% discount, then gdp would fall 10%.  GDP is still measured using industrial age metrics, but in the age of innovation and digital solutions, some aspects of economic growth and prosperity may go undetected.

Overall, there are a lot of things on motion today, and with a strong economic backdrop, enthusiasm over fiscal and monetary policy, and record earnings, we think it is best to remain focused on well thought out goals and objectives and to not get caught up in GameStop excitement.

Innovation, Tech, 2021 and your Money...even when the power goes out

The innovation fast forward button was pushed during Covid and we are in a position to capitalize....but how?

The Bitcoin Craze!!

Bitcoin and other cryptocurrencies have been all the rage and have come back into the spotlight after a steep increase in value, edging close to $20k per coin for the first time since 2017.  The blockchain technology that it is based on is been said to be almost unhackable, but storage on the wallet used can be hacked (see more about Wallets later in the overview). With Bitcoin and other Cryptocurrencies trading at these highs, we thought it would be helpful to give a quick reference guide to help people navigate some of the questions that might arise in potential investor and users’ minds.

What is Cryptocurrency?

Simply stated: a new form of digital money that is decentralized.  The foundation of cryptocurrencies is a new technology called blockchain.  Blockchain is an online public ledger that is used to track transactions.

Below are a few good documentaries on the rise of cryptocurrency.

Learn more about blockchain:

 What is the hype behind crypto currency? 

This digital asset class has caught some steam by being accepted by some major institutions and high net worth and high-profile individuals.  This recognition has legitimatized the currency more than ever.

 Why own Bitcoin or any other crypto currency?

What is the Value of Bitcoin?

Bitcoin is based on Supply and demand.  Unlike fiat money or precious metals, it is not backed by the faith of any government or the tangible metal itself.  Because of that it really has no underlying “worth” other than its use and the supply and demand of the currency.

Crypto Wallets:  wallets don’t hold money like we think of as a conventional wallet.  Instead, it holds a record of transactions.  You don’t have to choose one.  Hard wallets are considered better for larger holdings because they are more secure, while software and web-based wallets might be more convenient for frequent transactions.

Below are some helpful articles that go into detail on the different types of wallets and options.

Crypto Currency Tax Implications: 

Some helpful articles to reference.

 Crypto News Websites:  Below are a few good websites for news on crypto currencies.

 Best charting websites and tools: Similar to stocks, many cryptocurrency traders use charts to make more informed decisions.  Below are some possible options to explore to help with that.  Tradingview  is comprehensive and also covers traditional assets like stocks.

Info on Exchanges: There are many cryptocurrency exchanges.  Some of the key things to look for when choosing a platform may include:

The following articles are really helpful to find the right exchange for you.  We recommend researching this topic thoroughly before making the plunge.

We hope you found this information helpful as you learn more about cryptocurrency or consider getting involved.  We don’t engage in cryptocurrency directly, but feel it is important for us to be educated on the matter and be a resource for our clients on thinking through whether it might be appropriate.

Please reach out with any questions to

Thanks to Sebastian Varela for his help in putting together this article!  Great work!