If you are looking into retirement planning, you might have come across Roth IRAs and Traditional IRAs. Here are a few tidbits of information on both and how to choose which one is best suited for you!Instructions
Step 1
One of the main differences between the 2 types of IRAs is the way they are taxed. Traditional IRAs are tax-deferred, while Roth IRAs are tax-sheltered; Meaning you pay no tax upon withdrawing at retirement age with a Roth and tax is deferred until withdrawing with a Traditional.
Step 2
There are some income requirements for a Roth IRA. A single tax-filer can't make any more than $95,000 a year, and no more than $150,000 a year for married couples. However, there are no income requirements for a Traditional IRA.
Step 3
When using a Traditional IRA, withdrawals begin at 59 1/2 and become mandatory by age 70 1/2. There is no mandatory distribution age with a Roth IRA. If you withdraw your funds from a Roth IRA early, there will be no tax on the principal contributions. Pulling out money early from a Traditional IRA means a 10% penalty on your total.
P.S. I prefer pre-taxed, that way I don't have to worry what taxes will be in the future.
