The best retirement plans are those which are well-prepared and have been planned for way in advance. It is very important to consider the type of account you want to open to save for your retirement since it would definitely affect your entire retirement in the future. Although there are a lot of different types of retirement savings accounts available which are designed for you to deposit, invest, keep and even use your money, Individual Retirement Accounts (IRA's) are among the best since these are special accounts with tax advantages that would provide a lot of retirement benefits. Traditional IRA's allow an individual to save his/her money without paying taxes until s/he decides to withdraw it. Also, the money put into your IRA lowers your taxable income and earns tax-free interest while in the IRA account. Roth IRA's are basically just like traditional IRA's in terms of what it does and only offers variation as to the tax advantages it can offer, who can open a Roth IRA and the fact that the money being put in a Roth IRA may withdrawn without paying taxes.
Traditional Versus Roth IRA's
Despite being based on the same premise, traditional and Roth IRA's have distinct differences which you might want to consider.
In terms of eligibility, traditional IRA's may be availed of by workers who are below 70 years and 6 months old at the end of the calendar year while Roth IRA's has no age restrictions as to who can avail of it. Those who earn $95,000.00 singly or $165,000.00 as a couple are fully eligible. Higher income generators who earn $110,000.00 individually or $160,000.00 as a couple are automatically ineligible.
Traditional IRA's are fully tax deductible provided that the individual has no existing employer retirement plan. Roth IRA's, on the other hand are completely non-tax deductible.
For both traditional and Roth IRA's, the present maximum contribution for those under the age of 50 is $4,000.00, while those over 50 can contribute as much as $5,000.00.
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