In this video, I’m talking about Roth IRA vs Traditional IRA, taxes explained. I’m covering the 2018 taxes so when you are doing your 2018 taxes you can figure out if you should contribute to your Roth IRA or Traditional IRA for 2018.
You can contribute to your Roth IRA and traditional IRA up until you file your taxes or the 2018 tax filing deadline in April.
How the Roth IRA vs traditional IRAs work. Their taxable impact today and tomorrow. And a few examples using the IRS Form 1040 for 2018 to show the tax impact.
If you want to lower your taxes today and tomorrow this video is for you. If you want to save for your retirement and other goals using an IRA, this video is for you.
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LEARN MORE ABOUT: IRA Accounts
TRANSFER IRA TO GOLD: Gold IRA Account
TRANSFER IRA TO SILVER: Silver IRA Account
REVEALED: Best Gold Backed IRA
Individual Retirement Accounts, or IRAs, are retirement savings accounts that offer tax benefits to investors. Essentially, an IRA allows you to invest money for retirement and defer any taxes on your earnings until you withdraw the money in retirement. There are two main types of IRAs: Roth and Traditional. In this article, we’ll explain the differences between Roth and Traditional IRAs and the tax implications of each.
Traditional IRA
A Traditional IRA is a type of retirement account that allows you to save money for retirement and receive a tax deduction on your contributions. The money that you contribute to a Traditional IRA is tax-deductible in the year that you make the contribution. For example, if you contribute $5,000 to a Traditional IRA in 2021, you can deduct that amount from your taxable income for the year.
However, the money in your Traditional IRA will be taxed when you withdraw it in retirement. The idea behind a Traditional IRA is that you will be in a lower tax bracket in retirement than you are when you make the contributions, so you will pay less in taxes on the money in your IRA. Additionally, if you withdraw money from your Traditional IRA before age 59 1/2, you may be subject to a 10% early withdrawal penalty.
Roth IRA
A Roth IRA is a type of retirement account that allows you to save money for retirement and pay taxes on the earnings upfront, rather than when you withdraw the money in retirement. The contributions you make to a Roth IRA are not tax-deductible, meaning you will pay taxes on the money you contribute in the year that you make the contribution.
The benefit of a Roth IRA is that your earnings will grow tax-free, and you will not have to pay any taxes on the money when you withdraw it in retirement. This can be a huge advantage if you expect to be in a higher tax bracket in retirement than you are now. Additionally, unlike a Traditional IRA, there is no age requirement to start making withdrawals from a Roth IRA, and there is no penalty for early withdrawal of contributions (not earnings) at any time.
Tax Implications of Roth and Traditional IRAs
One of the key differences between Roth and Traditional IRAs is the way they are taxed. With a Traditional IRA, you receive a tax deduction on your contributions in the year that you make the contribution. This means that you will pay less in taxes for that year. However, when you withdraw the money in retirement, you will have to pay taxes on the earnings at your current tax rate.
With a Roth IRA, you do not receive a tax deduction on your contributions. This means that you will pay taxes on the money you contribute in the year that you make the contribution. However, when you withdraw the money in retirement, you will not have to pay taxes on the earnings.
Which IRA is Right for You?
Deciding between a Roth IRA and a Traditional IRA depends on a number of factors, such as your current tax rate, your expected tax rate in retirement, and your retirement goals. If you expect to be in a higher tax bracket in retirement than you are now, a Roth IRA may be the better option, as you will pay taxes on the contributions now and avoid the higher taxes in retirement. However, if you expect to be in a lower tax bracket in retirement, a Traditional IRA may be the better option, as you will receive a tax deduction now and pay taxes on the contributions at a lower tax rate in retirement.
In conclusion, both Roth and Traditional IRAs offer tax benefits to investors, but they differ in the way they are taxed. Understanding the differences between the two types of IRAs can help you make the best decisions for your retirement planning. Consult a financial advisor to help determine which type of IRA is right for your situation.
Even in traditional ira are we not putting the money from our checking account? which is taxed ? i really don`t get it.Maybe i`m too dumb .I mean are we depositing cash into the traditional ira ? so the money is still coming from our bank account . Only in America they make things so complicated for an average joe to understand things like taxes.
Which 1 is more profitable long term ?
Amazing, thank you !!!!! 🙂
Why are my already taxed salary that goes into ira accounts taxed again? This is such a fraud.
For 2019, married filing jointly, husband makes over 124k and has 401k at work, wife is a stay home mom. Thier traditional IRA contribution would be non deductible, so does this mean they will get taxed later during retirement? 1. If this is the case, wouldn't it be taxed twice? 2. Wouldn't it be better to contribute to a Roth IRA instead, so they don't pay tax at withdrawal?