Roth IRA vs. Traditional IRA

Essay by ynksjb24High School, 12th gradeA+, January 2006

download word file, 2 pages 4.3 1 reviews

A Roth IRA is a unique method of investing used by smart individuals to save for a richer retirement. By placing a sum of money into a Roth IRA, you are saving for a better future and a quicker retirement. Over the years as you add more and more money into your Roth IRA account, it compounds into a much larger sum of money. A Roth IRA is tax friendly as well. says, "although contributions are not tax deductible, withdrawals are tax-free as long as they are made after age 59½ and the account has been in existence for at least five years". Atlantic also says Roth IRA distributions are free of taxes if "you are using the funds for the purchase of a first home or you are disabled or deceased". Roth IRA's are a great way to save for retirement; they may just save you from having to work your entire life.

However, they may not be suited for all investors, but they are a good safe investment for those who aren't the most financially literate.

The overall benefits of a Roth IRA are that which follows. They are not deductible and any withdrawal is free from federal income taxes. Roth IRA's also let you make contributions to it until you reach the age of 70½, which is not included in the traditional IRA. With a Roth IRA, there are no minimum required distributions. As opposed to a traditional IRA in which it requires minimum distributions usually starting on April 1 of the year after you reach 70½.

A traditional IRA is another tax-advantaged way that can help you save money for your retirement. You may contribute up to $3,000 or 100% of earned income; whichever is less, to a traditional IRA every year. However,