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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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?? about Traditional and Roth Ira's-Need Help
My dh's new company does not have a 401K plan so we would like to just contribute the same amount into this IRA account. He has 2: One a traditional and one a Roth. I just called my credit union and they said it is more of a tax issue.
Does anyone know which one he should be putting money into. He just transferred his other 401K into the traditional. Do I continue putting the money there, or into the Roth?
Thanks!
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Posted 6/12/06 10:20 AM  |
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DDB336
LIF Toddler
Member since 8/05 421 total posts
Name:
Diana
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Re: ?? about Traditional and Roth Ira's-Need Help
With a traditional IRA you get to deduct your contributions for the year on your tax return, but will be taxed on your gains after you start taking money out after you turn 59.5 years old. A Roth IRA will grow tax free, but no annual deduction. There is also a phase out on the roth, I think if you make something over 150K you can't have one. Sorry no sure on the number. If you are young I think it's better to go with the roth if you can, but it really depends on your situtation. Someone please correct me if I'm wrong.
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| Posted 6/12/06 10:36 AM |
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MrsPorkChop
Twinning!!
Member since 5/05 9941 total posts
Name:
Missy
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Re: ?? about Traditional and Roth Ira's-Need Help
this should help
401k comparison
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| Posted 6/12/06 10:37 AM |
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Smiley
LIF Infant
Member since 6/06 83 total posts
Name:
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Re: ?? about Traditional and Roth Ira's-Need Help
Just a correction on the above post re:taxation. On a traditional, you will be taxed on the ENTIRE withdrawal at your ordinary tax rate at that time, NOT just the growth. You never paid taxes on any of the money until that point, so the gov't taxes you then. The benefit being twofold:
1. tax deduction on your income now!
2. Hopefully your tax rate at the time of withdrawal will be lower after retirment, therefore lower taxes paid on that money later.
ROTH IRA you do not get any deduction now. However, when you withdraw the money at retirement, no taxes whatsoever and the money you take does not count at all towards taxable income, therefore potentially keeping you in a lower tax bracket for other income such as 401(k)'s, traditionaly IRA's, etc.
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| Posted 6/12/06 10:43 AM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: ?? about Traditional and Roth Ira's-Need Help
Thanks so much! I really wish his company would just have a plan but they said not enough people were interested. It stinks because I like having it just taken out of the check each week.
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| Posted 6/12/06 10:45 AM |
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Smiley
LIF Infant
Member since 6/06 83 total posts
Name:
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Re: ?? about Traditional and Roth Ira's-Need Help
you can usually set up an IRA or Roth IRA with automatic withdrawals from your checking on a monthly basis.
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| Posted 6/12/06 10:46 AM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name:
Ginger
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Re: ?? about Traditional and Roth Ira's-Need Help
Posted by Smiley
you can usually set up an IRA or Roth IRA with automatic withdrawals from your checking on a monthly basis.
I'll have to find that out then. That would be great. I like when money can just be taken out and I don't have to worry about tranferring it every week from one account to the other. Thanks!
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| Posted 6/12/06 10:46 AM |
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DDB336
LIF Toddler
Member since 8/05 421 total posts
Name:
Diana
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Re: ?? about Traditional and Roth Ira's-Need Help
Posted by Smiley
Just a correction on the above post re:taxation. On a traditional, you will be taxed on the ENTIRE withdrawal at your ordinary tax rate at that time, NOT just the growth. You never paid taxes on any of the money until that point, so the gov't taxes you then. The benefit being twofold:
1. tax deduction on your income now!
2. Hopefully your tax rate at the time of withdrawal will be lower after retirment, therefore lower taxes paid on that money later.
ROTH IRA you do not get any deduction now. However, when you withdraw the money at retirement, no taxes whatsoever and the money you take does not count at all towards taxable income, therefore potentially keeping you in a lower tax bracket for other income such as 401(k)'s, traditionaly IRA's, etc.
just a question for my own knowledge. I traditional IRA is funded with after tax dollars, verus a 401K of pre-tax dollar, so the traditional IRA is still taxed on the entire amount? Thanks
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| Posted 6/12/06 10:50 AM |
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Smiley
LIF Infant
Member since 6/06 83 total posts
Name:
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Re: ?? about Traditional and Roth Ira's-Need Help
A traditional IRA and a 401k are both funded with pre-tax dollars. That being the case, both are fully taxable at the time of withdrawal.
Roth IRAs are funded with after tax dollars.
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| Posted 6/12/06 10:59 AM |
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