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LOANS
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What
is an IRA?
(cont.)
Difference Between
a Traditional and Roth IRA
A Traditional IRA
is primarily an individual savings plan. Contributions are made up to a
specified limit with the contribution tax deductible. Money invested and
earned in a traditional IRA are subject to income taxes at time of
withdrawal. Withdrawals can be made without penalty once you reach the
age of 59 1/2 years of age and you must begin withdrawing from your
account when you reach the age of 70 1/2.
A Roth IRA is also
primarily an individual savings plan. Contributions can be
made up to a
specified limit on a non-deductible basis. This means, you can make a
contribution to your Roth IRA but not take a deduction on you income tax
for the contribution like you can with a traditional IRA. Withdrawals
are tax free within certain limitations. Withdrawals can be made without
penalty once your reach the age of 59 1/2 provided the funds have been
in the account for 5 years. You can continue contributing to a Roth IRA
even if you have reached the age of 70 1/2. |
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