|
|
|||
 For years, traditional IRAs have been popular with investors seeking a substantial current income tax deduction, as well as tax-deferred growth. For those who qualify for a current income tax deduction, contributions to a traditional IRA are not subject to federal income taxes in the year they are made. Instead, taxes are deferred until the retirement age of 59 1/2 or later when the retiree is typically in a lower income bracket and subject to reduced Federal income taxes. Keep in mind, however, that there are substantial penalties for early withdrawl. In 1997 the Taxpayer Relief Act created a new tax-favored saving vehicle called the Roth IRA that contains some distinct tax advantages. Unlike traditional IRAs, Roth IRAs are not tax-deductible. Contributions are made with after tax dollars, grow tax deferred and withdrawls of funds in certain circumstances (after a five-year holding period or age 59 1⁄2 whichever is longer) are tax free. Qualified distributions from a Roth IRA are not included in a taxpayer's gross income or subject to penalty for early withdrawal. These special circumstances include death or disability, and the purchase of a first home. Expenses for college may also be withdrawn without incurring the 10 percent penalty, although withdrawn earnings would be subject to normal federal income taxes. |
Investment Opportunities & Options • Investment Portfolio Diversification • Stock & Bond Alternatives • Mutual Funds • Mutual Funds vs. Stocks • Traditional IRAs and Roth IRAs Banking Opportunities & Other Savings Alternatives • Savings Alternatives |
|||