How To Invest In A Traditional Or Roth IRA

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Published: October 7, 2021

Learn how to invest in an IRA and what the difference is between the retirement accounts. Your money is tied up until a maturity date that can be used when you leave the workforce. There are some pros and cons when it comes to this method.

There are two primary types of IRAs: Traditional and Roth.

A Traditional account can be opened by anyone who will be under the age of 70. The funds an individual contributes are not taxed until disbursements are made upon retirement. This type is ideal for those who find themselves in a high tax bracket.

A Roth account, named after Senator William V. Roth, Jr. of Delaware, is an individual retirement fund in which contributions come from taxable income. However, profits made as it matures are tax free after the age of 59 when the funds are withdrawn. There are other conditions from any tax penalty, including first-time home buyers and disabled individuals.

For many, the hurdle of getting an account open to invest in the first place is the hardest thing to overcome. It is also a way to cut your taxes, and that might help you get over that hurdle. After all, making a deductible IRA contribution can add $1,750 or more to your tax refund.

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