Roth Ira Vs. Traditional Ira: Which Is Better For You?

Roth Ira Vs. Traditional Ira: Which Is Better For You?

By:




Saving for the future is one of the most talked about things in the country. It is also the best way to secure your future. For years we have been told to invest as soon as possible in an Individual Retirement Account (IRA). The choices that are perplexing people is whether to invest in the traditional IRA or the Roth IRA. If you are facing this dilemma you can read on to see all of the pros and cons for each retirement plan.

What is a Traditional IRA? It is simply a tax deferred retirement savings vehicle. Some of the monies may be taxed yearly depending on your individual circumstance, but it is mostly based on a pretax payment into a retirement savings account. The main advantage to the traditional IRA is that it can put you into a lower tax bracket. The account allows your money to continue to gain interest without being taxed. There are no income limits on who can start an IRA account.

Another benefit of the traditional IRA is that at age 591/2 you will be able to withdraw some of the funds provided you meet certain criteria. These withdrawals will be taxed at that time. This one could be a plus and a minus, you will be required to withdraw a certain amount every year after you reach 70 whether you need to or not.

What is the Roth IRA? This is also a tax-exempt retirement account, it differs from the Traditional Ira in that it has some income limitations. For instance if you are filing taxes as a single you cannot have a Roth if you make over 95,000 a year. Married people are limited to 150,000 a year. One good thing is that the distributions are tax-free. Again the minimum age for withdrawing funds is 591/2 and when the money is taken out it is not taxed. The earning however will be taxed. There isn't a minimum distribution for the Roth IRA which makes it more flexible that the traditional IRA.

To label one better than the other would be an injustice to each of them. The pros and cons are compelling for both. One thing that is for sure if you can afford it you can participate in both without penalty. This way you get the best of both opportunities. Individuals who don't have access to the 401K programs that come with employment can use the Roth.

About the Author:
When Pat isn't busy working with one of his many small business consulting customers, he can be found fly fishing or traveling around the world. He is also well known by people looking to buy web hosting services with premium customer service and at a low cost.



Article Originally Published On: http://www.articlesnatch.com


Tags: , , ,

|

Loading...
Related....
Videos...

Recent Finance Articles

Comments

Still can't find what you are looking for? Search for it!

Loading

Site Navigation:

Copyright 2005-2011 ArticleSnatch, LLC - All Rights Reserved.
Privacy Policy | Terms of Service.