ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Roth vs. Traditional IRA

Updated on August 31, 2011

Roth vs. Traditional IRA - Which is Better?

If you are not familiar with the differences between the Traditional IRA and a Roth IRA, you’ll have a hard time figuring out where you will invest your funds in preparation of your retirement. Though, many people have their own perception which of the two is better, you must recognize that these two kinds of retirement investing plans target dissimilar objectives. So, if you would like to review Roth vs. Traditional IRA, you must study their features accordingly, so you can choose, which one best fits your needs.

On tax implications, the contributions made on Roth IRAs are post tax money. Under certain stipulations granted by the law, there are no taxes a contributor shall pay when normal withdrawals or distributions are carried out. For Traditional IRAs, the contributions are initially set as post tax money. Still, the contributed money are tax-deductible that lessens your tax basis for that particular tax year. Traditional IRAs’ withdrawals incur tax and tax deductibility is restricted by the Modified Annual Gross Income (MAGI) and contribution in 401(k) or pension.

Roth vs. Traditional IRA Comparison

When comparing between Roth vs. Traditional IRA, you should properly look at all the factors that will affect your retirement planning. You must check the income limits and contribution limits of these IRAs. When it comes to distributions, you can withdraw your funds starting at the age of 59 ½ or when the distributor becomes bedridden or disabled. For the Roth IRA limitations, withdrawals can begin when you reach the age of 59 ½, your account should be at least five years opened or if the account holder becomes disabled.

Roth IRA has no forced distributions while Traditional IRAs delineate forced distributions that can start at the age of 70 ½ with a penalty of 50 percent on the minimum withdrawal. Traditional IRA does not allow contribution withdrawal, but Roth IRA may allow you to withdraw the total contribution on your IRA at any point of time. For early withdrawals, Traditional IRA will grant you 10 percent penalty and additional taxes if you make distributions before you turn the age of 59 ½ with some exceptions as stipulated by the rules. For Roth IRA, early withdrawals that are made more than your contributions to include seasoned conversions will incur normal income taxes and 10 percent penalty for non-eligible withdrawals.

If you want to buy a house using your Roth IRA, you can withdraw up to $10,000 as your chief down payment, only if you didn’t own a home for the last 24 months. The house you will acquire should be named after you as the account holder or should be titled under the name your direct descendants. Traditional IRA on the other hand, allow you to make distributions up to $10,000 for your first time purchase of home under specific stipulations.

Traditional IRA vs Roth IRA

Learning more about IRAs

Learning about the Roth vs. Traditional IRA will also let you understand about some components that the two IRAs are the same. Both IRAs allow you to withdraw money for expenditures of higher education for you, your children and grandchildren. They also permit you to make withdrawals for medical expenses of more than 7.5 percent of your AGI.

When choosing between Roth IRA and Traditional IRA, it would be best if you already set your requirements that will make it easier for you to decide what retirement plan is the most effective for your financial stability in the future. You can also decide between an IRA vs Self-Directed IRA.

If you are ready to start your IRA, learn how to open a Roth IRA.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)