Roth IRA vs Traditional IRA

In the world of finances, there is one thing everyone is sure of: everyone retires.  Every single person in the United States who works for an employer has thought of their plans after they retire.  For the tax years 2006-2007, the annual contribution limits for an IRA per person was $4000 for those under 50 and $5000 for those 50 and over. For the 2008 tax year the contribution went up by $1000. These plans often involve saving up money for the golden years of one’s life.  Putting money in a piggy bank or beneath your mattress is no longer an option these days.  Neither is storing all of your money in a savings account.  There are several other lucrative ways to save money and receive benefits while doing so.  Two of these options are Traditional IRAs and Roth IRAs.

An IRA is a traditional individual retirement account.  Like all other types of retirement accounts, traditional IRAs has its benefits as well as its not so hot spots.  Everyone can open a traditional IRA, no matter how much you earn.  They involve tax deductible contributions that oftentimes depend on your level of income (how much money you make).  There are mandatory withdrawal dates with this kind of IRA.  You must withdraw money by age 70 ½, but may begin at age 59 ½.  And if you withdraw money before the mandatory age, you will be fined a pretty penny.  This kind of account is recommended as a hands-off until retirement plan.

Roth IRAs are similar to traditional IRAs in certain aspects and different in others.  One of the main benefits of Roth IRAs is the simple fact with the money you invest in this kind of retirement plan accrues tax-free.  Taxes will only have to be paid after you have withdrawn money from the account. There are certain prerequisites when attempting to open a Roth IRA.  Only single-filers earning a limited $95,000 per year, or married couples earning a combined $150,000 annually, may open this type of account.  You can also withdraw your retirement money at any time without hefty penalty fees.

Both of these kinds of IRAs have inherent benefits and where you invest your money should be discussed with a professional financial planner adept and well-versed with retirement plans. 

Issues related to IRAs include:

• 401k
• 401k Rollovers
• Retirement Plans
• Savings
• Investments

Are you interested in opening a retirement plan?  If you or anyone you know wants to open a Roth IRA or a Traditional IRA, please contact one of our Financial Planners today!

A representative will call you as soon as possible.

Updated: K.E.