What is a roth ira?
In 1997 the Roth IRA was developed in order to encourage people to plan for their own future rather than relying solely on the social security system.
Traditional IRA’s and Roth IRA’s have many common traits, but their are also many differences btween the two. It is important to be aware of them when deciding which is the right fund for you, so I will discuss briefly a few of them.
The funds contributed to a traditional IRA are tax deductible meaning that you can deduct the amount you contribute to the fund from your income while filing your tax return papers. In a Roth IRA you are not able to deduct the contributions from your income.
A traditional IRA allows for a few penalty free withdrawals, but they have very strict rules and can only be taken advantage of in very specific circumstances. This is a bit frustrating because you can not access your earnings until you retire.
In a Roth IRA you are allowed to withdraw any funds contributed after a five year “seasoning” period.
The loose rules of the Roth IRA account make it a perfect candidate for an emergency fund. After the seasoning period of 5 years, you can use the fund to cover any unexpected costs and expenses.
It is important to pay attention to your personal circumstances befpre diciding how to plan for your retirement.
