The IRA Decision: Traditional or Roth?
Thursday, May 22nd, 2008When looking at retirement plans, the IRA pops up frequently. But what types of IRA plans are there? The following is a list of the different Sacramento IRA plans you can consider in your planning:
The Traditional IRA. Simply put, contributions to a traditional IRA are deductible. You do not have to pay taxes on these contributions. However, when it comes time for retirement and you take these funds out, you then have to pay taxes on them.
The Roth IRA. The Roth IRA is the opposite of the traditional IRA. The Roth IRA contributions are not deductible; you pay taxes on them when you contribute. However, when you retire and you pull these funds out, they are then deductible, which means you will not pay taxes on them in the future.
There are two schools of thought when it comes to selecting which IRA plan to go with. Some feel that the traditional IRA is the way to go: let the extra income that you are allowed to keep to be invested and grow. Some feel that the Roth IRA is smarter: pay taxes now, because your tax rates may be higher later. Neither is wrong. Deciding on your IRA plan is a personal decision, and there are benefits to either plan.