34

For the reasons you cite may prefer the Roth IRA where you pay tax on the money contributed now, but future withdrawals are tax free. However there is a benefit to pretax plans such as traditional IRAs. Assume Tim and Ron are in a the 25% tax bracket and each will dedicate 1K per year to retirement savings. Tim does a traditional IRA, Ron a Roth. Because ...


17

So you only benefit if you are in lower tax bracket when you withdraw With a traditional IRA, you benefit the most if you are in a lower tax bracket when you withdraw, but you still benefit some if you are in the same or even a slightly higher tax bracket. You are implicitly comparing to a non-IRA alternative, which I will take to be an ordinary taxable ...


10

Any trades made within an IRA are not subject to being taxed for that given year. If you wanted to be a high-risk trader then you could trades stocks till your eyes bleed and not be subject to taxes on your gains. This of course assumes that you're actually making trades in your favor instead of losing money like most people =)


6

Lots of good answers pointing out the financial advantages, but I don't see any mention that retirement accounts can also provide you with some protection in the event of a bankruptcy or lawsuit. While not ironclad protection in either event, they're definitely not as exposed as a brokerage account would be. https://www.fool.com/retirement/what-happens-...


5

My question is basically what makes IRA better than putting in a brokerage account to buy index fund etc. You put money in a regular brokerage account with after-tax dollars. When you sell something within a brokerage account, you may pay taxes on your gains every year1. If you were to take the same after-tax dollars and put them into a Roth IRA instead of ...


3

When your income is low, then contributions into a Roth IRA or Roth 401(k) make a lot of sense. When my kids were in school and not making much money, then paying their 0% tax to put money in the Roth makes perfect sense. At somebody is at the end of their career when they are in a high tax bracket then the traditional plan makes the most sense. Someplace in ...


2

You are deferring taxation part of your income until a time that you choose to have it taxed. That choice is a critical component of retirement tax planning. With careful planning, it is possible to never pay taxes on deposits or earnings in an IRA. For example, as long as you keep your IRA withdrawal (and any other income) during retirement below the ...


1

Roths grow tax-free To make the clearest (simplest) case for IRA, let's consider the ROTH IRA. This was developed to answer some problems with traditional IRAs. Comparing "Roth IRA" to "normal investments" will illustrate the situation very well. Ron earns $5000 and puts it in a Roth IRA. Norma earns $5000 and puts it in a brokerage ...


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