Frugalnomics

The most common retirement plans for individuals are the Roth Ira and Traditional IRA. Both retirement accounts have the same objective, which is to ensure that those who contribute have a stable retirement once they stop working. The individual and Roth IRA have similarities, but they have quite a few differences as well. It is important to examine the features of each plan before deciding which one best suits your retirement needs.

With Traditional IRAs, the contributor can get the money that they have contributed to the fund at the age of 59 ½ or if the contributor suddenly is bedridden or disabled. Traditional IRA contributions can be tax deductible depending on the income level of the person contributing. With a Traditional IRA, funds that are withdrawn prior to the age of 59 ½ are subject to a penalty of 10%. Everyone is eligible for a Traditional IRA regardless of income.

With the Roth IRA, there is no mandatory age for distribution of funds and contributions made are not tax deductible. The funds from a Roth IRA are able to be used to purchase CDs, stocks, bonds and other types of investments. There are income restrictions as single filers can make up to $95,000 per year and married filers must have a combined maximum income of $150,000 per year. Contributions that are made can be withdrawn without a penalty at any time.

It is important for individuals to examine each extensively and decide which plan they qualify for. Both have great advantages and limitations. Although these plans have the same objective, they have different terms, so it is important to examine each fully before choosing one. With your money being important, retirement is just around the corner. It is time to start investing today. But before you do fully understand what you are getting for your money.