Roth IRA's vs Traditional IRA's

Which one is better for you?

What is a Roth IRA?

A Roth IRA, or an individual retirement arrangement, is a certain type of retirement plan under US law that is generally not taxed, provided certain conditions are met. It was named after William Roth from Delaware who helped create this form of retirement plan.

Comparing

Roth IRA
  • Requires you to pay taxes on it
  • Earnings are not taxed while in the account
  • If you withdraw early there are no taxes or penalty on principle
  • 10% penalty and taxes on earnings
  • Not taxed after the age of 59 1/2
  • Never a force of removal at any age


Traditional IRA

  • Not taxed on the money that you put in it
  • Earnings are not taxed while in the account
  • If you withdraw early there is a 10% penalty and taxes
  • Force removal of any money at age 70 1/2


Which is better for you?

It all depends on how much money you want to put into a retirement account, how long it will be before you retire, when you plan to start taking away from your IRA account, and your tax bracket now and when you plan on retiring. No one person is going to be the same so you really have to talk with your retirement agent and see which fits you the best. There are definitely advantages and disadvantages to both of these IRA's.