What type of IRA for college student?

Question

What type of IRA should a college student open? Traditional IRA or Roth IRA?

Answer 1

A Roth IRA is usually the best bet for a young person. You are most likely in the 10 or 15 percent tax bracket. As a student you don't qualify for the savers credit and without children you would not qualify for earned income credit. A traditional IRA would give you an additional $150 in federal savings per $1,000 contribution at the most. With the Roth you get tax free earnings, tax free distributions at retirement, and you can take out your contributions without penalty.

When you do qualify for the credits, investing in a traditional IRA can help, or hurt your refund, by lowering your adjusted gross income and your taxable income. The best way to know is to figure it both ways and look at the bottom line.

Answer 2

A young person should have a Roth IRA rather than a traditional IRA.

Over a long period of time, the tax benefits of a Roth are greater than a traditional IRA even if the deduction for a traditional IRA reduces your current taxes.

Answer 3

If you do not need the tax deduction that a traditional IRA provides, it makes sense to open a Roth. That is because you get taxed when you withdraw from a traditional IRA but not from the Roth. If you get no tax benefit from the Traditional being tax-deductible against current year income all you are doing is deferring tax. With the Roth you are avoiding it completely.

Answer 4

you're too youthful and in too low of a tax bracket to commence an IRA. i comprehend Congress replaced the guidelines so as that it is not unavoidably locked in until eventually you're fifty 9 a million/2 yet there are nevertheless outcomes in case you're able to desire to take $ out. save $ in an emergency fund on the financial business enterprise; or use it for college training, living expenditures, etc (only don't be frivolous and waste it.) you will desire to build reductions in direction of determining to purchase a house interior the destiny.

Answer 5

Roth.