Individual Retirement Account (IRA)
Individual Retirement Account (IRA)
If you’re contributing $150 per month to retirement, your account could hold to up $78,000 after 20 years**. Over half of that (about $42,000) is investment earnings–the money your contributions have generated just by being in the account. With a Roth IRA, you won’t need to pay taxes when you take out any of that $78,000. With a traditional IRA, you’re taxed on the entire sum of $78,000.
Traditional IRA
- Your contribution each year is tax deductible (if you’re under a certain income limit)
- You aren’t taxed on the income you make as it grows
- You pay those taxes when you withdraw it for retirement
- Anyone can open a traditional IRA
Roth IRA
- You pay taxes upfront at today’s tax rates
- You never pay taxes on your investment earnings
- While there is an income limit to open a Roth IRA, anyone can convert their traditional into a Roth