June 11th, 2009

Selecting from between Roth Vs Traditional by Talking with Your Financial Counselor About Benefits and Costs of each

Posted in Finance

IRA stands for Individual Retirement Account. Roth and traditional are the two variations. A traditional ira contribution is made with money you may be able to deduct on your tax return and any earnings grow tax-deferred until you withdraw them in retirement. A Roth IRA contribution is made with money you have already paid taxes on and your money may grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met. Both saving plans offer the same ira interest rates. Fixed and variable options are available. Depending on the current market a variable rate could provide better return than a fixed rate.

When deciding on Roth Vs Traditional Ira investment, consider whether you want pre-tax benefits or nontaxable income on withdrawal. The decision is not easy because the tax situation during retirement is unpredictable. Because the average person retires in the higher tax bracket, planners suggest Roth and many others recommend both. It is a good idea to meet with a financial counselor to discuss your options.