The topic of IRA's & Roth IRA's can certainly be confusing! But these investment tools are valuable in helping to set you up for the retirement that you envision.
Why do so many people choose them over traditional IRAs?
The IRA that changed the whole retirement savings perspective. Since the Roth IRA was introduced in 1998, its popularity has soared. It has become a fixture in many retirement planning strategies because it offers savers so many potential advantages.
The key argument for going Roth can be summed up in a sentence: Paying taxes on your retirement contributions today may be better than paying taxes on your retirement savings tomorrow.
Think about it. Would you rather pay taxes today or wait 10 years and see where the tax rates end up? With that in question in mind, here are some of the potential benefits associated with opening and contributing to a Roth IRA.
Do you know the difference?
Traditional Individual Retirement Accounts (IRA), which were created in 1974, are owned by roughly 33.2 million U.S. households. Roth IRAs, however, were created as part of the Taxpayer Relief Act in 1997, are owned by nearly 22.5 million households.1
Both are IRAs. And yet, each is quite different.
Some specifics about the "second act."
Does your vision of retirement align with the facts? Here are some noteworthy financial and lifestyle facts about life after 50 that might surprise you.
Up to 85% of a retiree’s Social Security income can be taxed. Some retirees are taken aback when they discover this. In addition to the Internal Revenue Service, 13 states currently levy taxes on some or all Social Security retirement benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. (West Virginia, incidentally, is phasing out such taxation.)1
Perhaps both traditional and Roth IRAs can play a part in your retirement plans.
IRAs can be an important tool in your retirement savings belt, and whichever you choose to open could have a significant impact on how those accounts might grow.
Why do so many people choose it rather than a traditional IRA?