In this video I am going to Easily Explain what is a Roth IRA? What is a Traditional IRA? What are the similarities between a Roth IRA vs Traditional IRA? What is better a traditional IRA or a Roth IRA? Which should you choose a Traditional IRA or a Roth IRA?

Both of these accounts are individual retirement accounts, which means you can have them in ADDITION to your employer sponsored retirement plans such as your 401k, 403b, etc. The deadline to contribute to both of these accounts is April 15th – because there are contribution limits! Both the traditional and the ROTH IRA, the max you can contribute to it is $6000 per year as of 2021, and $7000 per year if you’re over the age of 50. You cannot contribute $6000 each to both a ROTH and the Traditional IRA, the max contribution is $6000 across both accounts. The biggest difference between the ROTH IRA and the Traditional IRA is how they are taxed. In a TRADITIONAL IRA, your get a tax deduction for your contributions directly on your paycheck. Which means that you’ll pay taxes on earnings later when you withdraw them. With a Traditional IRA is you are required to make withdraws from them starting at age 70.5. If you withdraw earlier then 59.5 you are subject to a penalty of 10% Lastly Thing when you do withdraw you will need to pay TAXES on those at your ordinary income rate at that time, so if you think your tax rate will be increase in the future, then the ROTH IRA is right for you. The ROTH IRA varies from the TRADITIONAL IRA because whatever money you get in the ROTH IRA are completely tax free at the time you withdraw them. If you make more than $139k a year single, or $206k as a married couple, you cannot contribute to a Roth IRA – but I recommend doing a backdoor Roth IRA. In order to do a back door IRA you contribute to a traditional IRA, then convert it to a Roth IRA, so you can get around the income limits.

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REVEALED: Best Gold Backed IRA

When it comes to saving for retirement, there are several options available, including Roth IRAs and Traditional IRAs. Both these Individual Retirement Accounts serve as an excellent way to accumulate wealth for your golden years. However, deciding which IRA to choose can be a daunting task. In this article, we will compare both Traditional and Roth IRAs, their contribution limits and help you determine which one is best for you.

What is a Roth IRA?

A Roth IRA is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement. This means that your contributions are taxed upfront, but all the earnings made through the investment grow tax-free. Moreover, when you withdraw money in retirement, you don’t pay taxes on it. However, Roth IRAs come with specific contribution limits.

The Contribution limit for 2021:
$6,000 for those under 50
$7,000 for those 50 and older.

What is a Traditional IRA?

A Traditional IRA is a retirement account with tax-deferred growth, meaning your contributions are tax-deductible in the year you made them. When you withdraw the money in retirement, you pay taxes on both the contributions and the earnings you made. Like Roth IRA, there are specific contribution limits associated with Traditional IRA.

The Contribution limit for 2021:
$6,000 for those under 50
$7,000 if you’re 50 or older

Roth IRA vs. Traditional IRA: Which should you choose?

When it comes to choosing between Roth and Traditional IRA, there is no one right answer. The decision depends on your current tax situation, your future tax situation, and your personal financial goals. Here are a few factors that can help you decide:

Tax Brackets:
If you are currently in a high tax bracket and expect to be in a lower tax bracket in the future, Traditional IRA may save you money. However, if you expect to be in a higher tax bracket in the future, Roth IRA could be a better option.

Age:
If you’re under 50 and have several years to grow your money tax-free, Roth IRA can be an excellent option. However, if you’re over 50 and worried about not having enough money for retirement, Traditional IRA’s tax savings may be valuable to you.

Investment Options:
Some investors may prefer Roth IRA because it allows for more flexibility when it comes to withdrawing funds. Unlike Traditional IRA, Roth IRA does not require minimum distributions at any age.

In conclusion, Roth and Traditional IRAs are both powerful tools to help you save for retirement. Ultimately, the choice between them depends on your unique financial situation and goals. We suggest you consult with a financial advisor to help you choose the best option for your retirement savings.