Roth IRA versus a Traditional IRA

Roth IRA versus a
Traditional IRA

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WWW.PROFITABLEINVESTINGTIPS.COM

Tax time is coming and this is the time of
year when many individuals consider
putting money in their IRA.

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UAL-FUNDS/ROTH-IRA -VERSUS- A -TRADITIONAL-IRA

Here we consider the virtues of a Roth
IRA versus a traditional IRA.


In either case putting money aside for
retirement is a good idea.


Managing that money while it is in a Roth
IRA versus a traditional IRA is very
important.


And deciding up front on a Roth IRA
versus a traditional IRA may take a little
thinking.


Here is a brief rundown of the
differences between a Roth IRA versus a
traditional IRA.


Roth IRA versus a
Traditional IRA

A Roth IRA is a specific type of individual
retirement account.


United States tax law allows individuals
to put aside a set amount of money in
such an account.


The money is first taxed.


However, if the terms of the Roth IRA are
met the money is not taxed upon
withdrawal.


On the other hand with a traditional IRA
one can put aside a set amount of
money for retirement and deduct that
amount from ones taxes.


But, when one takes money out, usually
during retirement, the withdrawals are
taxed.


The rationale is that a person is not
earning a regular income during
retirement and as such pays at a lower
tax rate and perhaps pays no taxes at
all.


If you invest in dividend stocks you will
pay taxes on the dividend when your
income is lower if you have a traditional
IRA and you will not pay at all if you
follow the rules of a Roth IRA.


As always seek expert advice and read
the fine print before investing in a Roth
IRA versus a traditional IRA.


What Can You Invest
in with a Roth IRA
versus a Traditional
IRA?

In general one can invest IRA assets in
common stocks, bonds, mutual
funds, bank certificates of deposit, or
real estate.


All such investments through a Roth IRA
versus a traditional IRA must meet the
specific requirements of the Internal
Revenue Service.


As a rule there are more types of
investments that can be made in a Roth
IRA than in other types of tax
advantaged retirement plans such as
pensions, profit sharing
accounts, 401Ks, etc.

What is available may depend on the
trustee of the account.


For example, a bank may only offer CDs.
A stock broker may only offer stocks.
And, mutual funds will obviously only
offer mutual funds.


How Much Can I
Invest in an IRA?

The IRS limits how much you can put in
an IRA. It has to be the smaller amount
of your taxable compensation and the
limit amounts listed below for 2013 to
2014.


Age Related Limit to IRA Investment, 2013-2014

Age 49 and Below

Age 50 and Above

$5,500

$6,500


IRA Investments Are
Still Investments

When you make your decision regarding
a Roth IRA versus a traditional IRA you
still need to do your fundamental
analysis of the investment.


There is no protection against bad
judgment just because your money has a
tax advantaged status.


Beware of investing in gold through your
IRA.


The shiny stuff is headed down.


On the other hand, if you believe that
over the long term gold might recover it
might be a good idea to buy stock in a
gold ETF with a Roth IRA versus a
traditional IRA and hold for the long
term.

Roth IRA versus a Traditional IRA

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