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The difference between an IRA and a Roth IRA

The term IRA stands for individual retirement account. Now choosing between an IRA and a Roth IRA is a heavy choice to make. Both help in planning for retirement pension and both would help save up money however both the IRA and Roth IRA offer different advantages. The difference between an IRA and a Roth IRA are mainly the advantages it may give a customer. In order to choose which would suite a customer better, a customer should look at the advantages of the IRA and the ROTH IRA depending on the needs and prefer ability. As stated both are individual retirement accounts which help a customer who would want their savings to be secured.

The difference between an IRA and a Roth IRA may lead to larger financial consequences depending on the needs of the annuitant. Now in an individual retirement account, the accumulations are tax deductable depending on the income level of the customer, as for the withdrawal periods, these become available for the customer starting at the age of 59 and a half and is mandatory for the customer upon reaching the age of 70 and a half. Upon periodic withdrawals earnings are taxed for the customer.

Another advantage of the individual retirement account is that the funds gained can be used to buy investments; these investments may be stocks or bonds. Another good thing is that the individual retirement account is available for everyone and it not restricted to a certain bracket of income. The funds if withdrawn before the minimum age requirement of 59 are put under a 10 percent penalty. Now for the Roth individual retirement account, some of the advantages are opposite that of the limitations on the IRA alone. Like for the accumulated contributions in a Roth IRA is not tax deductible, and there is no mandatory age requirement for withdrawal of funds. Now as for the individual retirement account whereas there are taxable amounts, in the Roth individual retirement account the principal amount and earnings are 100 percent tax free, this is of course made possible if all the rules and regulations were followed. Just like the IRA the funds produced by the Roth IRA can be used to purchase stocks and bonds-investments. Now unlike the individual retirement account which is available to everyone with no restrictions on the income, the Roth IRA has a requirement that its customers who are single with an income of $95000. If it is supposed for a married couple, the average income should be $150000 annually and the principal amount in the funds can be withdrawn anytime without having to pay any penalty for doing so.

As seen that the difference between an IRA and a Roth IRA is mainly the freedom of use on the funds and the tax free earnings a person may gain. In choosing between the two many would want the Roth IRA, yet customers must meet their income bracket which is why amongst the many benefits acquiring this type of annuity is quite hard and it is not available for everyone who would choose to do so.