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IRA Accounts

N

novon

Diamond Member
In light of all the taxes I owe this year, I was wondering if I could put some money in an IRA account. What are the pro/cons of doing that versus a traditional savings account?

Does one have to pay taxes after age 65 when the money can be withdrawn?

Where is a good place to get an IRA?

Thanks
 
I'd recommend Scottrade because they don't charge any fees. And go with Roth instead of Traditional, unless you need the money now. You can also take money out for purchase of a first home I believe.

Traditional IRAs

Traditional IRAs ? An account holder with earned income may make yearly contributions up to the age of 70 ½. Some individuals receive a non-refundable tax credit for contributions. Contributions to Traditional IRAs may or may not be deductible. Regardless of whether or not a deduction is received for the contribution, the earnings generated on contributions to Traditional IRAs are tax-deferred. IRA holders do not include earnings from Traditional IRAs in income until the year a distribution is taken.

Required minimum distributions must begin when an account holder reaches the age of 70 1/2.


Roth IRAs

An account holder who has earned income within specific income limits may make yearly contributions. All contributions to Roth IRAs are made with after-tax dollars. Therefore, no tax deduction may be taken. Some individuals receive a non-refundable tax credit for contributions. The portion of a Roth IRA distribution that represents a return of contributions is not taxed when distributed since these assets were contributed on an after-tax basis. Distributions of earnings taken for certain qualifying purposes after a five-year period are tax-free.
 
If you have a company 401k or earn a high wage, you may not qualify to make a tax-deductible traditional IRA contribution.

Roth IRA contribution rules are much looser, but you don't get a tax deduction. (Of course you get tax-free growth, which is a very good thing.)
 
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