Roth IRA
Roth IRA the tax free money saving option
Nowadays, Roth IRA has become widely popular in the market. People open the Roth IRA as well as convert the traditional IRAs into a Roth IRA especially since it was announced in 2010 that irrespective of the income limit anyone could convert into a Roth IRA.
It has been evident that there are many remarkable differences between traditional IRA and Roth IRA. Roth IRA wins the battle due to its positive flexible tax structure despite its rigid income limits.
The most prominent and crucial difference between the traditional IRA and the Roth IRA is the withdrawal of the money which is tax-free in Roth as well as penalty-free.
The withdrawal of money is tax-free as in Roth IRA as an individual contributes the money on which the taxes are already paid. Hence, once the tax is levied, a person does not have to pay the tax again and can withdraw money from the account whenever he wants.
It means that an individual does not have to worry anymore for the further taxes as now on one can withdraw the money from the retirement account without any taxes or penalties. In contrast to that, in traditional IRA the contribution is pre tax, while the withdrawals are taxed so the individual falls in the lower tax bracket upon retirement.
This way the individual does get income tax benefits upon retirement; however, he ends up losing a major portion of his savings in taxes unlike Roth IRA.
After the death of an individual, the Roth IRA allows the dependant to withdraw the money without any taxes or the penalties. If it is expected that the income tax is going to rise in the future then it helps the individuals to save money which can be spend as the individual wants once he retires.
It has been evident that there are many remarkable differences between traditional IRA and Roth IRA. Roth IRA wins the battle due to its positive flexible tax structure despite its rigid income limits.
The most prominent and crucial difference between the traditional IRA and the Roth IRA is the withdrawal of the money which is tax-free in Roth as well as penalty-free.
The withdrawal of money is tax-free as in Roth IRA as an individual contributes the money on which the taxes are already paid. Hence, once the tax is levied, a person does not have to pay the tax again and can withdraw money from the account whenever he wants.
It means that an individual does not have to worry anymore for the further taxes as now on one can withdraw the money from the retirement account without any taxes or penalties. In contrast to that, in traditional IRA the contribution is pre tax, while the withdrawals are taxed so the individual falls in the lower tax bracket upon retirement.
This way the individual does get income tax benefits upon retirement; however, he ends up losing a major portion of his savings in taxes unlike Roth IRA.
After the death of an individual, the Roth IRA allows the dependant to withdraw the money without any taxes or the penalties. If it is expected that the income tax is going to rise in the future then it helps the individuals to save money which can be spend as the individual wants once he retires.
