Traditional vs. Roth IRAs: Understand the Retirement Planning Benefits of Each

traditional or roth ira

An IRA is an individual retirement account. The two major kinds of IRA are the Roth and traditional IRA. The most you can can contribute to either in a year is $6500. Contributions to a traditional IRA can be tax-deductible, but you will pay taxes later when you withdraw the money. You will be taxed an extra 10% if you withdraw from this account before age 59 1/2. When you contribute to a Roth IRA, your contributions have already been taxed. However, you will not be taxed when you withdraw the money after retirement (as long as you are 59 1/2 or older). You can’t contribute to a Roth IRA if your income is above certain limits. People should choose whether to contribute to a traditional or Roth IRA based on many factors, including their current tax bracket and age.

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Traditional vs. Roth IRAs: Understand the Retirement Planning Benefits of Each

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