I need to really focus on building up a retirement and don't know what the difference in these two are.
2007-10-02 17:08:37 · 4 answers · asked by icunurse85 7 in Business & Finance ➔ Personal Finance
A ROTH IRA is is a nondeductible retirement account that offers back-end tax breaks. Qualifying taxpayers can contribute up to $5,000 annually. These contributions are not tax-deductible when you make them. However, the investment income earned within the account is not taxed while it is building up. And -- if you follow the rules -- all the money will be tax-free when it is withdrawn.
2007-10-02 17:15:01 · answer #1 · answered by Anonymous · 0⤊ 0⤋
With a traditional IRA you contribute income and then deduct it from your taxes. When you withdraw the money, you are taxed on it at that time. With a Roth, the funds you contribute are after-tax dollars. You choose which plan is best by taking a guess as to whether you'll be in a higher tax bracket now, or later in life.
2007-10-03 00:12:19 · answer #2 · answered by darylsgirl1114 4 · 0⤊ 0⤋
If you are young than you can almost guarantee that you will be in a lower tax bracket now, compared to when you are withdrawling the money. You have to pay income tax on the money no matter what. Better to pay it now at the lower bracket.
2007-10-03 00:19:43 · answer #3 · answered by Justin F 1 · 0⤊ 0⤋
http://www.irs.gov/publications/p590/
2007-10-03 00:42:24 · answer #4 · answered by jeff410 7 · 0⤊ 0⤋