is it one link to some kind of investment and the other not?
2006-10-01 07:29:34 · 9 answers · asked by max 2 in Business & Finance ➔ Investing
When you invest in a "traditional' IRA, you may be able to deduct some or all of your contribution from your income before it is taxed. Essentially, you are not taxed on that money right now, you are taxed on it when you use it, hopefully at retirement. The thinking behind this is that you will be making less when you retire, so your tax will be lower, allowing you to defer tax until you will pay less of it. Of course, there are things, such as a high-ish income, that can keep you from being able to deduct it at all, in which case you need to see a financial advisor about other types of investing.
With a Roth IRA, you don't deduct anything now, so you are paying tax on the money and then putting it away. On the flip side, when you retire and use the money, you aren't taxed on the interest as you would be if the money were in a savings account or other investment vehicle. Also, with a Roth IRA, you have more access to your money if you need it, since you've paid tax on your principal already.
jI use a Roth IRA, since I make very little and can't use the deduction. This way, the money is NEVER taxed, not now, and not later. What's 'best' is different for each financial situation, so talk to your tax professional or financial advisor. And let me know if I can be of any further assistance.
2006-10-01 07:38:01 · answer #1 · answered by Katie Short, Atheati Princess 6 · 0⤊ 0⤋
traditional Ira, let you deduct your contribution in the year that is made and you don't pay taxes on that money until you retire that most likely you will be in a lower tax bracket. If you withdraw b efore age 59 1/2, besides paying tax in that money you will have to pay a 10% penalty. A roth Ira is contribution that you made in money that has already been taxed. All the money earned will be tax free when you withdraw at retirament or after age 59 1/2
2006-10-05 18:30:03 · answer #2 · answered by lm050254 5 · 0⤊ 0⤋
truly pass with the Roth. in view that a 19-year previous commonly doesn't have a intense income, he/she doesn't desire the tax deduction you get with a prevalent IRA. With a Roth, contributions at the prompt are not tax-deductible, yet all salary are 100% tax-loose even as withdrawn after age fifty 9 a million/2.
2016-10-16 03:04:45 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Traditional - put money in and deduct from income for tax purposes. When you take it out you pay regular tax on the entire amount. You basically save by not paying tax on the interest every year. The entire amount compounds.
Roth - put money in and do not deduct. When you take it out there is no tax.
So basically Roth - pay taxes now, Traditional - pay taxes later. Get a spreadsheet and see which is better. A Roth is probably better for a long period.
2006-10-01 07:36:11 · answer #4 · answered by Barkley Hound 7 · 0⤊ 0⤋
Traditiona IRA contributions are tax deductible and grow tax free. Gains and income are taxed at withdrawl.
Roth IRA are not tax deductible, but withdrawals are tax-free as long as they are made after age 59½ and after the account has been in existence for at least five years
2006-10-01 07:33:50 · answer #5 · answered by aint_no_stoppin_us 4 · 0⤊ 0⤋
The difference is the way the taxes are paid. Traditional, pay the applicable tax rate when it's withdrawn. Roth, pay the taxes now at the current tax rate and withdraw anytime without taxation.
2006-10-01 07:37:13 · answer #6 · answered by nido_tr3s 5 · 0⤊ 1⤋
Roth IRA - Pay taxes now
IRA - Pay taxes when you divest
2006-10-01 07:31:42 · answer #7 · answered by Anonymous · 0⤊ 1⤋
IRA = Irish republican Army
ROTH IRA = Jewish Irish republican Army
2006-10-01 07:38:24 · answer #8 · answered by Anonymous · 0⤊ 0⤋
someone please ban this freak in the previous post, his advertisement is annoying!
2006-10-02 07:50:52 · answer #9 · answered by Anonymous · 0⤊ 0⤋