Roth or Traditional IRA

Roth

• Your contributions are not tax deductible and are made with "after tax" dollars.
• Your earnings grow tax free. Money you withdraw is not taxed if your Roth IRA is open for at least five tax years and you are past the age of 59 ½.
• Your contributions can be withdrawn at any time without penalty.
• Qualified distributions are tax and penalty-free.
• No mandatory distribution age.
• Funds can be used to purchase various investments (Stocks, bonds, CDs, ETFs, etc).
• Available only to single-filers making up to $101,000, or married couples making a combined maximum of $159,000 annually.

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Traditional

• Your contributions may be tax-deductible.
• Your earnings are tax deferred. Your IRA savings will grow tax free until you withdraw this money after you reach the age of 59 ½.
• Withdrawals begin at age 59 ½ and are mandatory by 70 ½.
• Early withdrawals will be taxed and subject to a 10% penalty, unless under qualified circumstances.
• You can no longer contribute once you reach 70 ½.
• Funds can be used to purchase various investments (Stocks, bonds, CDs, ETFs, etc).
• Available to everyone; no income restrictions.

It is never too early to start contributing to an Roth IRA account. This is my second year of maxing it out and it is performing great. Best time to start is in a depressed market like this one. Much more upside in the future than downside; that’s if you believe this is not the end of the world. :)

Please leave any comments. What are your thoughts on the Roth or Traditional? Who are better suited to each type? Let’s help each other out so that we all can aim for our own understanding of Financial Independence.