what is the best investment, roth ira,traditional ira or 401K that doesnt contribute anything?
Question by Karen : what is the best investment, roth ira,traditional ira or 401K that doesnt contribute anything?
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In a traditional IRA, the money is set aside tax free, but you pay taxes on the funds when you use them once you reach the designated age. Also, you cannot take any funds from that account before age 59.5 years, or you’ll pay stiff penalties. Further, there are strict rules about when you must withdraw and how much you must withdraw when you reach the eligible age.
In a Roth IRA, the money you set aside is taxable today, but you won’t pay taxes years from now, when you need to withdraw the funds. You can withdraw the funds you contribute (but not the income those funds earn) if you need them, without penalties. The rules for when you can withdraw and how much you must withdraw are much more flexible than a traditional IRA.
I believe that Roth IRA option is not available to households above a certain income level.
It depends on how much you know about investing. If you have some experience, then a traditional IRA is best for you.
On the hand, if you don’t know much about investing on picking your own funds, or stock, the 401K Plan is best for you. Let’s the professional do your it for you.
As for Roth IRA, it not good because you can contribute only after tax. I don’t know if something you want to do. If you have a high incomes, then it is make sense for you.