Traditional IRA&rsquo;s Vs Roth IRA&rsquo;s

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<p style=”text-indent:.5in;line-height:200%”>Individual retirement accounts (IRA&rsquo;s) are savings accounts that individuals set aside money during their working years as a means of earning funds for life after retirement. The two main IRA&rsquo;s are the traditional and Roth methods which differ in a number of ways and can be used to achieve financial stability after retirement. This paper will offer an analysis of the benefits of the aforementioned saving methods.</p>
<p style=”text-indent:.5in;line-height:200%”>On one hand, traditional IRA is most appropriate for individuals who have higher income tax rates while employed and are effectively going to be charged lower rates after retirement. This is because the savings are charged tax at withdrawal and not at the time of deposit. As such, this IRA allows for tax incentives due to adjusted gross income during the contribution year. In addition, first-time homebuyers are allowed an early withdrawal pegged at $10,000 with a 10% penalty towards meeting their expenses.</p>
<p style=”text-indent:.5in;line-height:200%”>On the other hand, although Roth IRA contributions are not tax deductible at the time of deposit, there is no age limit attached to participation which differs to the 70 &frac12; years for traditional IRA. This means an individual will withdraw funds tax-free and creates an avenue where even after reaching the aforementioned age, one is not required to withdraw or receive a required minimum distribution (RDM) and thus can continue growing their savings. In addition, this account allows for withdrawal of contributions and qualified payments of $10,000 towards first-time homebuyer expenses without incurring a penalty.</p>

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