I am looking into investing into an IRA, but I am not sure which one?

Question

There are to type Roth and traditional. What is the difference? Can I use the same bank that I have my saving in? or should I open a account at another bank? Do you have any advise and recommedations for me?

Thank you

Answer 1

For a traditional IRA, you can deduct the amount you put in from your current income before figuring your taxes - for a Roth, you can't. The investments grow tax-free in both types. You pay taxes on the money you take out of your traditional IRA when you retire, you don't for a Roth, so it depends on when you want to pay the taxes.

Your bank should be able to handle either type, and also answer your questions about the differences. If you're putting it into a CD with a bank, compare rates - not all institutions have the same rates.

Answer 2

Above all else, watch the expenses (listed as expense ratio, 12b-1 fee, management fee, etc) that you will pay with whomever you choose to open your IRA. Over time, expenses (anything over .75% [point seven five per cent])expense ratio is too much) erode your return and thus less of your money is working for you. I would recommend Vanguard, T. Rowe Price or Fidelity. It might be a small headache to fill out the 3 or 4 pages of forms and mail it in with a check but it is usually a once in a lifetime task. Roth is best since it will be tax-free when you are old and withdraw it - although it isn't deductible from your income tax like the Traditional which will be taxable when you withdraw it. If you don't know much about mutual funds, I would recommend one of the Target funds that are based on the year near the time you will begin withdrawals such as the Target 2030, 2035, 2040, 2045, etc. funds. They are well diversified (holding many different types of stocks including foreign, and some bonds and cash) and change to be more conservative as the year you retire nears. Good Luck!

Answer 3

If you qualify for the tax break on a Traditinal IRA, this is the better choice based on time value of money. That is you let the taxes you would have paid be invested and grow.

If you do not qualify for the Traditional IRA tax break, then the best choice is the Roth.

It's OK to have both types of IRAs.
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Answer 4

With a Poth IRA you get the taxes taken out of the money when you put the money in. So let me ask you a question, would you rather have to pay taxes on $4,000 when you put it in or pay taxes on $40,000? The answer is pretty clear go with a Roth IRA

Answer 5

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