2006-10-05 11:24:53 · 8 answers · asked by annv06 2 in Business & Finance ➔ Investing
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2006-10-05 15:51:14 · answer #1 · answered by stock.trade 1 · 0⤊ 0⤋
The wikipedia has some great information on this.
Essentially, it depends on where you want to pay the tax. A standard IRA allows certain investments to be tax deductible, which is great because you are saving for retirement and saving on your taxes at the same time. However, there are some restrictions on how you get the tax deduction, and because of this it's impossible to withdraw from the IRA until you reach a certain age and you pay taxes on your IRA as you withdraw from it upon retirement (they tax it like income).
Meanwhile, your investments in a Roth IRA are not tax deductible, which is a disadvantage because you will likely be taxed now in a relatively high bracket as opposed to years down the road in a relatively low bracket (when you've retired). However, a Roth IRA affords you great flexibility in what you can do with your investments. You don't pay taxes when you take money out and you can take money out early and borrow against your Roth IRA (but there are often heavy penalties for doing so).
2006-10-05 11:36:39 · answer #2 · answered by ratboy_wustl 2 · 0⤊ 0⤋
One minor disadvantage is that no one can tell you what the tax laws will be like in 20, 30 or 40 years. Qualified distributions from Roth IRA's are tax free as now but many experts expect that to change in the coming years. No one ever though that they would tax Social Security, then in 1988 that all changed for many tax payers. Personally, I like Roth IRA's now but who knows in the future.
2006-10-05 16:18:24 · answer #3 · answered by Wayne Z 7 · 1⤊ 0⤋
Roth vs. Traditional IRA
http://www.fool.com/ira/ira03.htm
2006-10-05 11:33:34 · answer #4 · answered by nobody 5 · 1⤊ 0⤋
Disadvantages? Less money in your pocket paycheck to paycheck. Come April 15th, you will get less of a return on your income taxes.
Advantages? Roth is post-tax earnings, where a 401-K is pre-tax earnings. When you retire and draw the money out, you do not have to pay any income taxes on it.
2006-10-05 11:35:30 · answer #5 · answered by Mazz 5 · 0⤊ 0⤋
Very few disadvantages,, they are the best kept secret of the investment world... so good thy are going to do away with them. All after tax money but all all growth distributed without tax... over a long period... very advantageous!
2006-10-05 11:33:02 · answer #6 · answered by Wannabe007 2 · 0⤊ 0⤋
Disadvantages:
Your contributions are after tax money.
Limited to $4000 per year contributions.
Income limit restrictions
Penalties for early withdrawal.
Advantages:
All of your gains are tax free after retirement.
If you turn it into millions by wise investing, you have millions tax free for retirement.
Protected from creditors in in lawsuits and bankruptcies as are most retirement accounts (in most cases).
Can take a penalty free distribution for down payment on a first home.
2006-10-05 13:22:49 · answer #7 · answered by Anonymous · 1⤊ 0⤋
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2016-02-14 22:34:42 · answer #8 · answered by ? 3 · 0⤊ 0⤋