Roth IRA

Here are a few facts about a Roth IRA. A person is able to make contributions to their Roth RIA, these contributions are not tax deductible when they are actually made, but when a person takes out money from their Roth IRA (during their retirement years) and they use it for something that is a included under the qualified uses, it is tax free.

The minimum age for a person to be able to withdraw money from their Roth IRA is 59 ½ years of age. The principal amount from the Roth IRA can be taken out of the account at anytime without a penalty or fees but if a person takes out any of the earnings that a person has made in their Roth IRA early the money may be taxed or there may be a penalty.

There are income limits to the Roth IRA. A person who is filling their taxes as a single individual is not able to make more than $95,000. And couples that are filling jointly must have an income of no more than $150,000.

A traditional retirement plan

Here are some facts about a traditional retirement plan. When a person adds money to a traditional retirement account, or a Traditional IRA, the money is invested in the account before it is taxed. And depending on a person's income, their tax filing status, and a couple of other things, the contributions they make to their Traditional IRA may be tax deductible.

There are no income limits on who can contribute to a Traditional IRA. But not everyone who contributes to a Traditional IRA will have the benefit of a tax deduction. To be able to take out money from a Traditional IRA a person must be at least 59 ½ years old. And there are penalties if a person takes money out of their Traditional IRA earlier than age 59 ½. When they begin to take out money from a Traditional IRA the money will be taxed as would any other type of their regular income.

A Traditional IRA also has a minimum amount that a person is required to take out as soon as they turn 70 ½. So as soon as a person turns 70 ½ they must take out a certain amount of money from their Traditional IRA even if they do not need the money at that time.

The main advantage

The main advantage of using a Roth IRA is that the money that a person withdraws in the specific time is free from taxes. Another great advantage of a Roth IRA is that it does not have a minimum amount that a person must take out each time they withdraw money.

Of course for a person to truly know if a Roth IRA will be more advantageous for them compared to a Traditional IRA, they will need to look at their own situation and their finances. Everyone is different and therefore different retirement accounts will work better for each person and their family.