Choosing between a Traditional IRA and a Roth IRA

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by: billubarbar
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Date: Sat, 26 Feb 2011 Time: 7:23 PM
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Saving for the future is one of the most brought up things in the country. It is also the easiest method to secure your future. For many years we have been told to invest at the earliest opportunity in an Individual Retirement Account (IRA). The alternatives that are perplexing people is actually to invest in the traditional IRA or the Roth IRA. If you are facing this dilemma search for on to see all of the benefits and drawbacks for each retirement plan.Exactly what is a Traditional IRA? It is simply a tax deferred retirement savings vehicle. A few of the monies may be taxed yearly depending on your individual circumstance, but it is mostly with different pretax payment into a retirement checking account. The main advantage to the traditional IRA is it can put you into a lower tax bracket. The account allows your hard earned money to continue to gain interest without having to be taxed. There are no income limits on that can start an IRA account. Another advantage of the traditional IRA is that at 591/2 you will be able to withdraw a few of the funds provided you meet certain criteria. These withdrawals will be taxed at that time. This one might be a plus and a minus, you will be required to withdraw a certain amount yearly after you reach 70 whether you should or not.What is the Roth IRA? This is also a tax-exempt retirement account, it is different from the Traditional Ira in that it has some income limitations. For example if you are filing taxes as being a single you cannot have a Roth if you make over 95,000 per year. Married people are limited to 150,000 annually. One good thing is that the distributions are tax-free. Again the minimum age for withdrawing funds is 591/2 then when the money is taken out it isn't taxed. The earning however will be taxed. There isn't a minimum distribution for your Roth IRA which makes it more flexible that the traditional IRA. To label one superior to the other would be an injustice to every one of them. The pros and cons are compelling for both. One thing that is for sure if you can afford it you are able to participate in both without penalty. In this way you get the best of both opportunities. Individuals who don't have access to the 401K programs that is included in employment can use the Roth.

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