Im a minor so would that make a difference? Yes I do work. And which bank would be the best to get either? I mean the most profit.
2006-09-16 06:56:19 · 6 answers · asked by vash98mm 2 in Business & Finance ➔ Investing
Traditional IRA takes pretax $$ and grows. Money is taxed when you withdraw the money many years later.
Roth IRA takes posttax $$ and grows. Then, when you retire and withdraw that money, it's all tax free.
For most people, this is the best way to go for their first $4000 of money since it grows unencumbered. But, you'll have to decide for yourself whether you think your tax rate'll be higher or lower at retirement.
For you, it 100% makes more sense to do a ROTH IRA since your tax rate is probably 0% or close to 0% right now.
Kudos for getting started so soon
Hope that helps!
2006-09-16 06:59:05 · answer #1 · answered by Yada Yada Yada 7 · 3⤊ 0⤋
In a Traditional IRA, you contributions are tax deffered, but you have to pay taxes when you take money out. So this is great if you need a tax deduction now. Usually you cannot do both a 401K and a traditional IRA
In a Roth IRA, the contributions are not tax deffered, and none of the money is taxed when you take it out. So this is great if you do not need a tax deduction now. In most cases, you can put money into a Roth IRA even if you are already putting money into a 401K. The "Dream" of a Roth IRA is that you can make it grow to millions, and get it out tax free.
I use Scottrade for all my IRAs. They have no fees for IRAs, and I can invest in the stock market for $7 limit trades, and I can buy many mutual funds with no load and no transaction fees.
IMPORTANT: If your job offers a company matching 401K, put the maximum that they will match into it, before putting money into an IRA. You can usually transfer it to an intermediate Traditional IRA if you leave the job.
2006-09-16 16:11:51 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Don't think of the tax issue as Unsober described, rather think of it this way: Roth IRA offers no tax deductions, while the traditional IRA "might" offer a tax deduction this year (typically doesn't).
What makes the Roth IRA attractive is that there are no taxes paid on the account....in other words, the money will grow tax FREE.
Any financial institution can open a Roth IRA for you. I'd recommend you invest your Roth IRA money in a diversified portfolio of stock mutual funds.
2006-09-16 17:55:47 · answer #3 · answered by derek 4 · 0⤊ 1⤋
Basically traditional IRA you can deduct the money you put in now from your taxes - but you have to pay taxes on your money when you take the money out when you do so after your 59 1/2. A Roth IRA the money put in to the account are not deductable, but you don't pay taxes on the money when you take your money out of your account later.
Update: Go to http://www.quicken.com/cms/viewers/article/retirement/8539 which gives a good chart showing you the differences between the two. Good luck!!!
2006-09-16 14:04:22 · answer #4 · answered by Anonymous · 0⤊ 0⤋
A regular IRA is for Irish people. The Roth IRA is for Jewish only.
2006-09-16 15:22:34 · answer #5 · answered by Yardbird 5 · 0⤊ 3⤋
you put before tax money into a IRA and when you withdraw money you pay tax then.
Roth IRA, you put after tax dollars and when you take out money you dont have to pay tax on it
2006-09-16 13:58:29 · answer #6 · answered by Spaceman 6 · 0⤊ 0⤋