How do you decide which account type is best for you? Here we compare ROTH IRAs to Traditional IRAs with several examples to help you determine which account type will leave you with more money at time of retirement. .
Links at the end of the video send you to posts on www.begintoinvest.com which detail additional rules and regulations of IRAs that you should be aware of.
The links set up for the last slide do not work, here are the physical addresses:
Begin To Invest’s Comparison of Account Types:
Wikipedia’s ROTH IRA page: www.en.wikipedia.org/wiki/Roth_IRA
IRS.gov website for ROTH IRAs:
IRS.gov website for traditional IRAs: …(read more)
LEARN MORE ABOUT: IRA Accounts
INVESTING IN A GOLD IRA: Gold IRA Account
INVESTING IN A SILVER IRA: Silver IRA Account
REVEALED: Best Gold Backed IRA
I found a traditional IRA platform where you can invest in bullions and cryptocurrency.If you are interested in investing in bullions such as Gold you can open your IRA here: https://regalassets.com/a/19265 You can also open a cryptocurrency IRA where you can invest in cryptos such as Bitcoin, Ethereum or Litecoin: https://regalwallet.com/a/19265 Personally I would recommend you to invest in cryptos.
Why would they tax your own money anyway! Best off doing what the old-timers did keep it hidden from the fungus government to retire! Lol A jar in the yard sounds safer! Lol
Why does everyone assume that one pays a lower tax rate in retirement? Look, even if you're extremely frugal, you can easily be paying a HIGHER tax rate in retirement due to RMD of traditional 401Ks and IRAs. The rate of withdrawal can be set by the (required minimum distributions) RMDs and you will be taxed at that rate. If you have a substantial 401K these RMDs will be big bucks and will push you into a high tax rate, whether you spend a dime on yourself or not. You will get to watch as your traditional 401K gets half-eaten by taxes.
You have made sn absolute mess of explaining this.
Extremely very well explain thank you
Somewhat flawed analysis. Capital gains tax is not 25%. Tax on distribution at retirement should be lower for most as income will be lower.
Another reason a Roth is better is in a Roth your earnings are never taxed unlike a traditional IRA.
your assumption that captial gains tax rate is 25% is wrong. You also assume you take out and pay your top marginal tax rate of 25% of the IRA when we all know you don't pay taxes on your standard or itemized deduction amounts, you don't pay tax on your personal exemptions, and then you start by paying 10%, then 15%, etc. So this is flawed. But good job spouting out all of those numbers. Impressive!
if your tax rate before retirement and after retirement are the same, from a math perspective there is no difference.
example – 25% tax bracket
10,000 into a traditional grows ten fold to 100,000
7,500 into a Roth also grows ten fold to 75,000
You pay 25% tax on 100,000 leaves you with 75,000 while the Roth has no tax due so it is also 75,000.
This doesn't take into account the fact that you have in retirement you don't pay taxes on your personal exemption amount, nor do you pay taxes on your standard deduction amount. and then you pay 10% on next grouping of taxable income, then 15%. So the traditional is best even if your marginal tax rate pre and post retirement is 25%.
When you contribute to the Roth, you are paying your full 25% marginal rate to put it there. When you contribute to a traditional, you save the full 25% marginal rate. I would advocate doing some of both, but not fully one or the other.
When would it make sense to pay 25% on money that you could withdrawal at 0%, 10%, 15%? It doesn't make sense.
What I don't understand in your comparison of Ira vs Roth is, I thought the contribution max is the same for both?
You will NEVER invest $4125 into a Roth IRA, so all of these examples using these figures are not valid. I know this is very old, but many people may see this and need to understand that the comparison always needs to be the amount invested into the account. Otherwise, thank you for sharing.
Another important factor is that the traditional IRA gets a tax deduction on schedule A for the $5,500. Pretty much the taxpayer would roughly get to keep 25% (used in your examples)*$5,500, which is about $1,375 per year. This amount is accurate if he was able to itemize before using the $5,500 IRA deduction.
Thanks for breaking that down!
How do you know at what percentage your investment grows? (6% in the video)
And how do you find out your tax rate? Does that change annually?
Thanks!
What If a person already contributes the max to their 401K ($17,500) a year, but still wants to open up an eTrade account with money from a savings account. Can they still invest in a Roth IRA? (or is the max 17,500 per year no matter if the money for the IRA is post tax savings).
Thank You Very Much. Easy and Clear.
Thanks so much for this video, it answered a lot of my questions.
Great description! Thanks for the solid video 🙂
On the example you gave for the traditional IRA, why does the investor get taxed twice for the amount that went over, once for income tax and again for capital gains tax?
Also for traditional IRAs there is an income ceiling that changes each year of when you cap out on getting the tax benefit for traditional IRA. For 2014 the limit is $61K-$71K where starting past $61K you start to phase out in the amount you can claim as a tax deduction and past $71K you get zero tax deduction.
So unless you are lower income, the Roth IRA is the hands down best option almost every single time.
make an instagram page
thanks for sharing this information.
You do NOT get a tax credit for Trad IRA contributions, you get a deduction. Huge difference.
I do have a question. When the payer have to pay the capital gains tax, should the amount, on which you tax, contain any inflation effect that could compare the initial investment to the future investment value?