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Choosing The Right IRA

Feb 11, 2008
There are two types of Individual Retirement Accounts, and both lead to successful retirements. These two types of IRA's have different stipulations are those bring on different results both in the beginning and the end.

When deciding which type of IRA to use, you will need to look at both end of the spectrum. Let's take a look at Roth IRA's first. This type of IRA usually tends to be more popular due to the end results.

When you put contributions towards a Roth IRA, you are leaving it more retirement. When you become of age and can cash in your account, tax free. That's right. You don't have to pay a dime in tax when you redeem your retirement savings.

This is most obvious reason why investors choose a Roth IRA. This is because it differs in taxes when compared to a Traditional IRA. With a Traditional IRA, you will have to pay taxes on all money earned from compounded interest.

Now, this may seem like a big deal when cashing out your Traditional IRA, but there are other "discounts" along the way. Any contributions you make throughout each year are tax deductible for that same year. This way if you contribute $3000 to your Traditional IRA this year, you can also claim that much money as tax deductible.

The deciding factor will be whether you can learn to invest that extra cash you get back from your tax refund when you have a Traditional IRA. When you look at the number, the results are the same, if you can invest the extra cash you get back from tax refunds.

Taxes are not the only thing that should affect your decision of which IRA to use for your retirement. There are other stipulations with each type of IRA. With a Traditional IRA, you can't touch your funds until you are fifty nine and a half years old.

If you are using a Roth IRA, you can take money out of your account but it can only be used for certain uses, like buying your first house or to pay for college expenses. There is an income limit. In order to stay clear and free of fees with a Roth IRA, you cannot make more than $95,000 as an individual, or $150,000 as a couple.

As with any investing choice, it is always best to start when you are young. The sooner the better, when starting a retirement fund. Time is a key factor for most retirement funds.

It is also important to not only start when you are young, but continue adding contributions to your retirement fund over the years. You cans set up a direct withdraw from your checking account. This way, you won't have to remember to transfer funds to your retirement account.

Remember that any type of Retirement fund is better than none at all. Any time you decide to open a retirement account is a good time to start planning for your future financial success.
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