Tuesday, September 8, 2009

Roth IRA or Traditional IRA- pros and cons

Didn't the weekend fly?  They all do.  I trust you had a good Labor Day.  Back to work, drats.

In case you've wondered what the differences are between a Roth IRA and a Traditional IRA, I'm listing some below.  Either way, an IRA is a great way to save for Retirement, which I hope you are doing.

ROTH IRA-Advantages
  • protects retirement earnings by having an early withdrawal penalty
  • there is no mandatory withdrawal age
  • all earnings and contributions are 100% tax free when withdrawn
  • principal can be withdrawn at any time without penalties
  • available to single filers with income up to $95k
  • married couples with combined income of up to $150k
ROTH IRA-Disadvantages
  • money put in (principal) is made after taxes are paid (not tax deferred)
  • it does not lower your income on taxes when filed
  • contribution limit is $5k per year
  • what you put in lowers your taxable income when you file
  • earnings grow taxfree
  • protects your retirement money by having an early withdrawal penalty

  • earnings are taxed at withdrawal
  • contribution limit is $5k per year
Hope this helps.  I did the Roth, since you can withdraw principal (what I put in) without a penalty.  I also like the fact that all of money in the account is tax free when I take it out.

Bible verse:  Proverbs 28:20

A faithful man will abound with blessings, but he who makes haste to be rich will not go unpunished. 
Have a great day!

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