LANSING, Mich. (WLNS) – Not quite sure what the differences are between Roth IRAs and traditional IRAs? Don’t fret. 6 News is here for you with local money expert Stephen Schiestel to break it all down.
Regular IRAs and Roth IRAs are different types of “vehicles” that we’re going to use for retirement purposes, for IRAs or individual retirement accounts.
First, let’s talk about the traditional IRA.
In a traditional IRA we can contribute $6,000 this year into an account.
For those over the age of 50, we can add an additional $1,000 for $7,000. But the amount that we can contribute is earned income, at least equal to the amount that we’re going to add to the account
Assuming that you meet some of the qualifications as laid out by the IRS, the second advantage would be:
As we’re building dollars in retirement, those are going to be able to build tech. And then at retirement, when we’re ready to start taking distributions out, those distributions are going to be taxed.
When we flip over to a Roth IRA , we’re making contributions with after-tax dollars, the same contribution limits are in place – $6,000.
For those that are under 50k, up to $7,000.
The key thing is with a traditional IRA, the money is going to be taxable. Distribution with a Roth IRA is not taxable at distribution. Which one should you pick? It’s going to be dependent on which account are you eligible to participate in.