A Roth IRA is a personal retirement fund started in 1997 to help encourage people to plan for their own retirement instead of relying on the social security system.
Traditional IRA's and Roth IRA's have many common traits, but their are also many differences btween the two. It is important to be aware of them when deciding which is the right fund for you, so I will discuss briefly a few of them.
One of the main differences that comes to mind is that the traditional IRA is tax deductible. You are allowed to deduct the amount contributed to the fund for that year from your income when filing taxes. But the Roth IRA is not allowed as a tax deduction.
A second difference is that the Traditional IRA allows only for a few withdrawals that are penalty free, and they are only allowed inder very strict circumstances. This can be very frustraiting in the event that you need to access the fund before retirement.
The Roth IRA is much more loose with the withdrawal allowances. After five years you are allowed to withdraw the funds contributed.
The looseness of the Roth IRA has led some to use it as an emergency account for unexpected costs. After the 5 years, you can use it for emergencies and if there are none then you have a good start toward retirement.
It is important to pay attention to your personal circumstances befpre diciding how to plan for your retirement. - 15224
Traditional IRA's and Roth IRA's have many common traits, but their are also many differences btween the two. It is important to be aware of them when deciding which is the right fund for you, so I will discuss briefly a few of them.
One of the main differences that comes to mind is that the traditional IRA is tax deductible. You are allowed to deduct the amount contributed to the fund for that year from your income when filing taxes. But the Roth IRA is not allowed as a tax deduction.
A second difference is that the Traditional IRA allows only for a few withdrawals that are penalty free, and they are only allowed inder very strict circumstances. This can be very frustraiting in the event that you need to access the fund before retirement.
The Roth IRA is much more loose with the withdrawal allowances. After five years you are allowed to withdraw the funds contributed.
The looseness of the Roth IRA has led some to use it as an emergency account for unexpected costs. After the 5 years, you can use it for emergencies and if there are none then you have a good start toward retirement.
It is important to pay attention to your personal circumstances befpre diciding how to plan for your retirement. - 15224
