December 8, 2014

What is the difference between a traditional IRA and a Roth IRA? Why would a person choose one over the other?

4 thoughts on “December 8, 2014”

  1. Brennan Haag says:

    For a traditional IRA, the money isn’t taxed until you take it out. Your deposed will also grow free of tax. If you take the money out before your 59 and a half you will have to pay taxes and a 10% fee. Deposits to a Roth IRA are not deductible but you don’t pay taxes when you take the money out after the age of 59 and a half. Which one is better depends on someone’s situation and they really need to do research before they choose.

  2. Garrett Haag says:

    A traditional IRA takes pretax money and sets it asides before taxes are paid on it, this lowers your tax rate for the year. You will have to pay taxes on that sum of money and the gains on it when you take it out. A ROTH IRA take money that is already taxes and sets it aside and you will not need to pay any taxes on the gains on it if you take it out following the rules. The income bracket that you fall in makes a difference between which you would want, higher income is better off with traditional normally while lower income with ROTH, some say $50,000 and less for a ROTH and over that for a traditional.

  3. Mike Finley says:

    Great answers gentlemen. I have nothing further to add other than this. When opening up an IRA, do it at a place like where you can buy inexpensive (expensive ratio below .3% and ideally closer to .1%) stock and bond index funds without paying a load (commission). Awake to the possibilities!

  4. Rico Rumph says:

    Traditional IRA is pretax income vs Roth IRA is aftertax income. Traditional IRA will be taxed in retirement vs Roth is not taxed in retirement. Roth would be great in a perfect world. If you can afford to put after tax income in your Roth you can withdraw money tax free.

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