Posts Tagged ‘traditional ira’

Regular vs. Roth

Posted October 27, 2008 by Bernz

The vehicle we now call the Roth IRA was born on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. The Roth IRA provides no deduction for contributions, but instead provides a benefit that isn’t available for traditional retirement accounts: if you meet certain requirements, all earnings are tax free when you or your beneficiary withdraw them. Other benefits include avoiding the early distribution penalty on certain withdrawals, and eliminating the need to take minimum distributions after age 70½. Remember that in either cashing cashing an IRA is very expensive and should only be done for very extreme circumstances.

Plus and minus

The nice part is that you get a tax free retirement vehicle with the downside of not being able to deduct the money you give to your Roth IRA. Which is more important depends on the individual like your income level and how soon you will need the money. Usually a Roth IRA is better in most people’s cases especially when the income level in is beneath 160,000. Also you will not have to take money from it until age 70 ½.

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