IRA - Roth or Traditional?  Long Range Tax Planning?
820652
I'm a CPA and the Roth beats the traditional in almost every situation.  Think of it this way.......which is better?  Tax Deferred or Tax-Free?  With the traditional IRA you eventually pay the piper.\n\nTwo possible exceptions:  In the 401(k) scenario with an employer match, always take the free money.  Secondly, if you are nearing retirement and we are expecting a down market over the next five years, that might be a scenario where the deduction rather than the tax-free growth might make sense.  Run the numbers if this latter situation applies to you.
714890
Not a good idea at all, the penalty for borrowing against your retirement funds is pretty heavy, they will tax the crap out of you, best to try the Ameridream program or Fannie Mae Foundation. Best of Luck.
151555
The IRA CD grows tax-deferred or tax-free (if a ROTH) until the IRA is closed out (usually at retirement age 59 1/2 yrs+). The conventional CD is in a taxable account, so earnings/interest are taxable each year.  Both CD's are investments, however they are sitting in different kinds of accounts which dictate when taxes will be paid.
942670
You are brillant to be starting now.\nThere are all kinds of ways / vehicles to save for retirement, and all have different benefits. \n401(k) max to at least your company match...that free money. Then don't be conservative with the investment portion. You have 43 years to overcome fluxuations in the market.\nOther investments vehicles, like an IRA (tax free going out taxed on exit) or a  Roth IRA (taxed going in but tax free out), or an life insurance policy, or buying stocks directly ...depend on your circumstances. \nWhat income tax bracket are you in? How much can you set aside, are you interested in buying a home? Saving for that down payment? Going to school?\n\nIn general: you should have a nice mix of stocks and real estate investment, and eventually something conservative like bonds.  \nStocks can be via a fund, lots of stocks bundled together, but should include a spread of big and small companies, and domestic and international.\nReal estate you can buy and own, or have via real estate investment trusts (REIT).\nWhatever investment you choose, please do three things: Look at the costs associated. Look at the tax implications. DO YOUR OWN HOMEWORK. Don't trust someguy on YAHOO answers, or some guy in a nice office and a nice suit, with a smooth line--if something is to good to be true, it is.
53875
OK, you CANNOT roll a 401k account directly into a Roth IRA. You can roll your money into a Traditional IRA and avoid any taxation and penalties. (Definetly a good idea.)\n\nYou could then convert your Traditional IRA to a Roth IRA, but in doing this you would have to include the amount you convert as taxable income (pay income tax on the full amount). This may push you into a higher tax bracket, depending on your income and the size of your account.\n\nAssets in a Traditional IRA will be taxed when you withdraw them in retirement while the Roth IRA assets can be withdrawn tax free in retirement. Speak with a financial planner to help decide which choice is best for you.
627801
No, you can't avoid capital gains tax. Unless it is in an IRA if you sell it you pay taxes. That may not be that bad. If it is a long term gain bite the bullet and pay the 15%. The 15% maximum capital gains tax is a big windfall to someone in your situation. No one likes to pay taxes but in your case it is pay me a little now or a lot later.\n\nIf it isn't a long term gain yet then certainly wait until it is.
839674
The first step is to save a little at a time.  For example, you could open up a savings account and put $25.00 per month in it.  Force yourself to put the money in the savings account no matter what.  Cut out anything extra that you would have done with that $25.00 for the month.  Doing that, you would save $300.00 per year.  The BIGGEST THING in this is to FORCE yourself to put over money monthly.  Your savings will slowly grow, and pretty soon you won't be able to believe how much you were able to save.   There are some high interest savings accounts out there.  I would search for the highest interest rate on savings accounts to put your money into.  The higher the interest, the more money you will make. \n\nIf you would like to save for retirement, a great option to save with is a Roth IRA.  You put money into it just like any other savings, but you can't touch the money without penalty until you are 59 1/2 years old.  The good thing about a Roth IRA is that when you take the money out during retirement, the interest you earned is tax-free. :)  That can save you a lot of tax dollars in the long run!
630556
You definitely want to roll it over to a self-directed IRA, where you'll be able to invest in stocks, bonds, mutual funds, annuities, and yes, even CDs.  Stay away from the bank, their idea of a good return on an IRA is a 5% CD. No one under 55 should ever have CD's in their IRA, it's a waste of both your age (which can be a powerful weapon) and the IRA's tax-deferred status.  CDs are for much older people, or for money that needs to remain somewhat liquid--which is something IRA money does not.\n\nDespite Scuhbby's inane assertion that the average mutual fund does 16-30% (no, the average mutual fund loses money), mutual funds are absolutely the way to go.  Pick a broadly diversifed mix of assets classes, cover all your bases, and remember to rebalance every year.  A financial advisor might be able to help you with this, but if you have the tools, talent, and time to do it yourself, go for it.  And oh yeah, the discipline, which is the most important.\n\nMake sure you hit all the asset classes, such as large-, mid- and small-cap stocks, international stocks, investment grade and hi-yield debt, foreign debt, commodities, real estate, and precious metals.  Come up with a mix you're comfortable with, and sit back.  A properly allocated diversified portfolio will average 8-12% return per year, on average, and you'll be able to take advantage of the IRA's tax-deferred status.\n\nMOST IMPORTANT, if you qualify income-level wise, IMMEDIATELY look into converting your IRA (once you've rolled over the 401k) to a ROTH IRA.  Thus, not only will your preserve your tax-exempt status year-to-year, you'll also ensure all future earnings will be 100% TAX-FREE.  Even a normal IRA/401k requires you to pay taxes when you take distributions.  Converting could have some current year tax consequences, so consult a financial advisor for your specifics, but in nearly every case I have found it to be worth it.\n\nHope this helps!\n--J.
177816
Yeah, but wouldn't it be counterproductive? Wouldn't your home equity loan's interest rate be more than your annual return on your IRA? Are you going to fund the IRA just to take the money out after tax time and pay back off the loan? \n\nIf you did that, it would seem like you would just face the tax penalties in next year's return. I'm still very new to IRAs and have little experience in the finance area. Investigate it and let us know what you find!
606169
Roth IRA utilizes after tax money. You can contribute up to $3000 annually. This type of investment produces tax free income later in life. Long term savings Great idea!\n\n\nConventional IRA. Uses pre-tax money. shelters some of your income. \nMaximum contribution allowances change. Check current rules.\nGo to: clarkhoward.com for lots of info
373887
Assuming that both were invested in the same thing....and both earned the same interest rate.....the value of both accounts would be the same...\n\nBut when you start to withdraw funds......as the law stands right now....roth IRA withdrawels would be done tax free......but we dont know what the tax rates will be in 40 years.....they could be 0....so once again......the traditional IRA would win because you got an extra tax cut for 40 years......\n\nOr in 40 years...the govt. may decide to tax your roth IRA.......we dont know what the future holds.....and thats why many people take the tax cut now......bird in the hand is worth etc etc
384050
If you take from your traditional you pay tax on it.  If you take from your Roth you do not.  This is why you would want your CPA to review your tax situation.  Maybe they will suggest a combination depending on your tax bracket and how close you are to the bracket.
284469
You don't need to pay tax when you redraw from Roth IRA when retired. Traditional IRA only let you defer taxes.
468645
Yes you can absolutely.  they are two different animals.  A traditional IRA is funded with before tax dollars and a Roth IRA is funded with after tax dollars. A disbursement from a traditional IRA is taxed, and disbursement from a Roth IRA is not.
1148050
Go to Clark Howard.com. for the answer to this and many other questions dealing in the wise use of money!\n\nCiao,\n\nAngelo Fragapane\n\nRoth IRA 101 \nThe Roth IRA in a nutshell \nBy Kaye A. Thomas\nUpdated February 11, 2006\nGet a quick overview of the benefits and basic rules of Roth IRAs.\n\nThe Roth IRA was born on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. It's named after the late Senator William V. Roth, Jr.\n    The Roth IRA provides no deduction for contributions, but instead provides a benefit that isn't available for any other form of retirement savings: if you meet certain requirements, all earnings are tax free when you or your beneficiary withdraw them. Other benefits include avoiding the early distribution penalty on certain withdrawals, and eliminating the need to take minimum distributions after age 70½.\n\nPlus and Minus\nThe chief advantage of the Roth IRA is obvious: the ability to have investment earnings completely escape taxation. The advantage comes at a price, though: you don't get a deduction when you contribute to the Roth IRA.\n    So which is more important? It depends on your personal situation, and also on what assumptions you want to make about the future. How long before you withdraw money from your IRA? What will your tax bracket be then? What earnings can you anticipate in the interim?\n    You can do lots of fancy analysis, but the bottom line is that most people are better off in the Roth IRA. The chief reason is that the Roth IRA is effectively bigger than a regular IRA because it holds after-tax dollars. If you can take advantage of this feature of the Roth IRA by maximizing your contributions you'll add greater tax leverage to your retirement savings.\n    There are two other significant advantages to the Roth IRA. One is that the minimum distribution rules don't apply. If you're able to live on other resources after retirement, you don't have to draw on your Roth IRA at age 70½. That means your earnings continue to grow tax-free. The other big advantage is the ability to take certain early distributions without paying the early distribution penalty. In short, the Roth IRA makes it easier to keep your money in, and also easier to take your money out.\n\nEligibility\nYou can establish a Roth IRA by making a regular contribution to a Roth IRA or by converting a traditional IRA to a Roth IRA.\n    You may be eligible to make a regular contribution to a Roth IRA even if you participate in a retirement plan maintained by your employer. These contributions can be as much as $4,000 for 2006 ($5,000 if you're 50 or older by the end of the year). There are just two requirements. First, you or your spouse must have compensation or alimony income equal to the amount contributed. And second, your modified adjusted gross income can't exceed certain limits. For the maximum contribution, the limits are $95,000 for single individuals and $150,000 for married individuals filing joint returns. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $110,000 (single) or $160,000 (married filing jointly).\n    You can convert your regular IRA to a Roth IRA if (a) your modified adjusted gross income is $100,000 or less, and (b) you're single or file jointly with your spouse. You'll have to pay tax in the year of the conversion, but for many people the long-term savings outweigh the conversion tax.\n\nDistributions\nDistributions from Roth IRAs are tax-free until you've withdrawn all your regular contributions. After that you'll withdraw your conversion contributions, if any. Special rules apply when you withdraw your conversion contributions. When you've withdrawn all your contributions (regular and conversion), any subsequent withdrawals come from earnings. The withdrawals are tax-free if you're over age 59½ and at least five years have expired sinc
610231
You roll your 401K into a traditional IRA, then roll the traditional IRA into a Roth.  You will have to pay taxes on the income, but for some the Roth is a better deal (especially if you want to leave non taxable money to your children).
735323
If your only contribution to the traditional IRA is the rollover, then you may still be able to contribute up to $4000 ($4,500 if you are over age 50) to either the same traditional IRA or to a Roth IRA, depending on which one best fits you. \nThere are other factors involved here, such as whether or not you still contribute to your employer's retirement plan and how much you make. I'd be happy to do the calculations for you if you'll give me those numbers. But I understand that is sensitive information, so I will send you the link to the form you use to figure allowable contributions. \nRollovers are not considered contributions because they are in the same type of tax-advantaged plan. You would only have to be concerned if you put more into the IRA than you had in the 401K, or, conversely, if you spent some of the money and didn't out it all in (you might be liable for tax and penalties in that case). \nLet me know if I can be of further assistance :)