Roth IRA vs. Traditional IRA: Which Is Right for You?

It is never too early to start saving to achieve your retirement dream. One of the best ways to do that is by opening an Individual Retirement Account (IRA).

An IRA is a savings account with unique tax benefits, which can help you save more money for your retirement.

Introduced in 1997 as part of the Taxpayer Relief Act, a Roth IRA is an individual retirement account offering tax-free growth and retirement withdrawals.

What Is a Roth IRA

You can contribute to an IRA if you have taxable income. The Internal Revenue Service (IRS) has set some limits on the amount of money you can invest in IRAs.

What Are the Contribution and Tax Deduction Limit

Let's go back to Jim's example once again. At age 72, Jim must start taking distributions from his Traditional IRA holdings as per amounts mandated by the IRS, based on Jim's life expectancy and balance remaining.

Are There Any Required Minimum Distributions I Must Take From the IRA Accounts After Retirement

The IRS has introduced exception scenarios to avoid paying the 10% penalty tax for early withdrawal from Traditional and Roth IRAs.

Can I Avoid Paying Tax Penalties for Early Withdrawal

This decision comes down to personal preference, a fair guess of what your retirement income will look like, and IRS rules.

Should I Invest in a Roth IRA or Traditional IRA

Debtopramenschultz  Converting to a Roth IRA can be a good option if you expect to be in a higher tax bracket when you retire or if you want the flexibility of having both taxable and tax-free income in retirement.

Convert a Traditional IRA to a Roth IRA

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