How the Roth IRA is Different than the Traditional IRA

Now, there are two kinds of IRAs are available in the market, one is Roth IRA and the other is the traditional IRA. The Roth IRA is the newer edition of the traditional IRA. Though the concept of both of the IRAs is almost same but there are several differences between these two investment instruments. Go on reading this article, you will find the difference between these two investment instruments.

• In case of both of the product, you can save some of your taxes, but the tax saving mode is different in case of both products. In case of the traditional IRA, you don’t have to pay tax on the investment you will make in that instrument, but when you receive return in your old age, those returns will be fully taxable. But the reverse is true in case of the Roth IRA. You will have to pay tax on the invested amount but when you will receive returns, those returns will be fully exempted from tax. So, you are getting the choices as far as tax saving is concern. You should go for that product, which you think that suit you the best. As far as saving more money is concern, then Roth IRA scores over the traditional IRA.

• In case of the traditional IRA, you have to choose a option, when you want to take the return, you can choose to take that at 59.5 years or 70.5 years. If you want to withdraw the amount earlier, then you have to face a penalty. If you don’t want to withdraw the amount after the maturity, then you also face a penalty. But in case of the Roth IRA, there is no such restriction. You can withdraw amount at any time and you can let your investment to grow after the maturity also.