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Understand the differences between your IRA options

February 7, 2017

IRA street signWhen you’re saving for retirement, the nest egg builds a lot faster if you can put off paying taxes until you retire and are ready to withdraw your money. Uncle Sam gives taxpayers a few ways to do this.

Some accounts, such as a 401(k) or a company-sponsored individual retirement account, give you a double benefit. You can contribute pretax dollars to your account, which probably means you can save more than if you could contribute only after-tax dollars. And, you can deduct your contributions from your gross income, so you’re paying less in taxes. When you retire, and, it is hoped, are in a lower tax bracket, the money is taxed as it’s withdrawn.

Other accounts, such as a Roth IRA, allow you to contribute only after-tax dollars, but your earnings grow tax-free. In other words, you don’t have to pay taxes when you take the money out.

Here, we’ll examine some of the most popular tax-advantaged retirement plans.

From → Finance

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