Question by Claudio F: What is the difference between a roth IRA and a normal investment account by a broker?
1. In both cases I can invest only after tax money.
2. I can withdraw my money whenever I want in both cases.
3. I can only contribute $ 5,000 per year in the roth IRA while I can contribute how much I want with a normal investment account.
So why would I choose to open a roth IRA instead of a normal investment account where I can invest how much I want?
Best answer:
Answer by S
Any growth experiened in a ROTH IRA account is not taxed. Nor is taxed when you withdraw the money.
With a standard investment you will be taxed when you realize any profit by selling the investment.
So take an example where you have a ROTH IRA and a standard investment. Both start at 10,000 and both grow by 10%, to 11,000.
When you withdraw your IRA (assuming no penalties for ealry with drawal), you will get the full $ 11,000
When you withrdraw the investment you will have to pay taxes on the $ 1,000 of growth, so maybe you walk away with only $ 10,700.
This difference could add up to a huge amount over the lifetime of a ROTH IRA
What do you think? Answer below!
Which investing programs should be avoided? What do people think about Sharebuilder?
i only have 1K, wanna put it away in a roth IRA, since im very young now.
for vanguard and fidelity you need 3000 and 2500 to start an account….are there any known ROTH IRAs (with low broker fees like vanguard and fideltiy) with a low initial investment (talkin 500-1000)
1. In both cases I can invest only after tax money.
2. I can withdraw my money whenever I want in both cases.
3. I can only contribute $5,000 per year in the roth IRA while I can contribute how much I want with a normal investment account.
So why would I choose to open a roth IRA instead of a normal investment account where I can invest how much I want?
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