Roth IRA vs. Traditional 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.
There are many common traits between the regular IRA and the Roth IRA, and it is important to know the differences between them when deciding which to use.
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.
Another main difference to consider is that the penalty free withdrawal allowances in the traditional IRA are very few and far between. And they are only allowed under very specific circumstances.
The Roth IRA has much more loose rules in regard to withdrawals. After 5 years you can withdraw the funds contributed.
The looseness of the Roth IRA has led some to use it as an emergency account for unexpected costs. After the 5 years, you can use it for emergencies and if there are none then you have a good start toward retirement.
It is important to pay attention to your personal circumstances befpre diciding how to plan for your retirement.
