Comparing Roth IRA and Traditional Roth IRA
Indeed, it would be the wisest
of things to start thinking about one’s retirement plans at as early a time as
possible. For many, it would be quite puzzling as to choose one of the
Traditional IRAs or the Roth IRA, to establish an account with. Well,
each of these has its own advantages.
One can arrive at a wise decision comparing the advantages and disadvantages involved in the two and choosing the one that suits him the best.
In case of a traditional IRA, one can contribute the tax deductible contributions only whereas in a Roth IRA the contributions are not tax deductible.
A traditional IRA is open to everyone, without any income restrictions. Single-filers making a maximum of about $95,000 and married couples making a combined maximum amounting to $ 150,000 per annum are only eligible for joining Roth IRA.
In case of a traditional IRA, if funds including principal contributions are withdrawn before the individual completing 59 ½, (subject to exception), he may have to pay a 10% penalty. However, an individual having a Roth IRA is allowed to withdraw principal contributions at any time without a penalty, subject to a few minimal conditions.
In a traditional IRA, taxes have to be paid on the earnings at the time of withdrawal. However, in case of a Roth IRA , when the rules and regulations are met with, all the earnings including the principal are 100% tax free at the time of withdrawal.
In case of a traditional IRA withdraws commence at 59 ½ and considered mandatory by 70 ½ whereas in case of a Roth IRA there isn’t any mandatory age fixed.
There is one thing in common between the two. The funds from a traditional IRA as well as Roth IRA can be invested in stocks, certificates of deposits, bonds etc.
One can arrive at a wise decision comparing the advantages and disadvantages involved in the two and choosing the one that suits him the best.
In case of a traditional IRA, one can contribute the tax deductible contributions only whereas in a Roth IRA the contributions are not tax deductible.
A traditional IRA is open to everyone, without any income restrictions. Single-filers making a maximum of about $95,000 and married couples making a combined maximum amounting to $ 150,000 per annum are only eligible for joining Roth IRA.
In case of a traditional IRA, if funds including principal contributions are withdrawn before the individual completing 59 ½, (subject to exception), he may have to pay a 10% penalty. However, an individual having a Roth IRA is allowed to withdraw principal contributions at any time without a penalty, subject to a few minimal conditions.
In a traditional IRA, taxes have to be paid on the earnings at the time of withdrawal. However, in case of a Roth IRA , when the rules and regulations are met with, all the earnings including the principal are 100% tax free at the time of withdrawal.
In case of a traditional IRA withdraws commence at 59 ½ and considered mandatory by 70 ½ whereas in case of a Roth IRA there isn’t any mandatory age fixed.
There is one thing in common between the two. The funds from a traditional IRA as well as Roth IRA can be invested in stocks, certificates of deposits, bonds etc.
