When you begin to save for retirement will have an effect on which retirement plan you choose. Some retirement plans allow for you to put into the fund as much money as you want and this would be best for someone beginning to save later in life. While other funds have limits on how much money you can put into the fund each year and this kind of fund would be best for individuals beginning to save at a younger age.
If you are beginning to save at a younger age then a Individual Retirement Account known as a Roth IRA could work for you. The reason saving at a younger age is mentioned is because there are specific contribution guidelines that must be followed in order to have a Roth IRA, thus if you are trying to put away a lot of money then a Roth will not work. Listed below in this article are a few pros and cons to owning a Roth IRA.
To calculate your Roth IRA value a Roth IRA calculator can be found on the Internet if you are interested in knowing. A Roth IRA is a non tax deferred retirement plan, unlike the Traditional IRA which allows you to not pay taxes on the money in the account until later when it is taken out. The one disadvantage to the money being not tax deferred is also that by contributing to a Roth your adjusted gross income is not reduced. If you are close to a lower tax bracket then having your AGI reduced is a good thing because then you qualify for tax breaks and deductions.
A Roth IRA allows for the normal man to put back money for retirement and if he starts early enough there should be no worries. For someone starting to save later on in life a Roth may not be the best plan due to its rules regarding the contribution limits. Either way if you happen to be within the income limits you can contribute to a Roth and save some amount of money for your retirement.
- Traditional IRA or A Roth IRA You Decide (2011tax.org)
- IRA: Traditional IRA and Roth IRA (2010tax.org)