24 Jul What you need to know about Roth and Traditional IRA’s

For long-term investments, if your Roth IRA and Traditional IRA were invested in
the same models at precisely the same time, both accounts would have exactly the
same amount of growth. The difference, however, is how each account is taxed
when the client accesses money.

Roth IRA’s receive a much more tax-favored distribution of assets when compared
to the traditional IRA’s. Roth IRA’s are funded with money that has already been
taxed, so the gains grow tax-free and distributions are received tax-free, which
potentially means more money for the investor when distributions are received.
Depending on the investor’s income level it is possible to invest in both a Traditional
IRA and Roth IRA. This allows the investor to take advantage of funding an account
with pre and post-tax dollars.

The investor is free to choose how the contributions are allocated to each account,
as long as they do not exceed the allowable contribution limit. Currently, annual
contribution limits for investors age 49 and under are $5500 and investors age 50
and up can take advantage of the $1000 increase “catch up provision” and invest
$6500 annually.

Investors who are participating in a Corporate Retirement Plan (401(k) or 402(b))
can contribution to a personal IRA. Contributing to a personal IRA allows the
investor to take advantage of maximizing how much money they can have grow
either tax-deferred (traditional IRA) or tax-free (Roth IRA).

Depending on an investors income level. They may or may not be able to contribute
to both a Corporate Retirement Plan and an IRA.

It’s smart for investors to have a “rainy day” fund, while investing. It’s important for
the “rainy day/emergency fund” to be adequate for the investor to fund unforeseen
emergencies and/or opportunities.

Investors under age 59 ½ need to be careful withdrawing money from the IRA’s
because they will be required to pay an early withdraw penalty of 10%. Be smart
and have some money put aside, so there is no need to endure the pain of a 10%
penalty to access your money in an IRA.