Past Tense

In 1997 the Roth IRA was developed in order to encourage people to plan for their own future rather than relying solely on the social security system.

There are many common traits between the regular IRA and the Roth IRA, and it is important to know the differences between them when deciding which to use.

One of the main differences that comes to mind is that the traditional IRA is tax deductible. You are allowed to deduct the amount contributed to the fund for that year from your income when filing taxes. But the Roth IRA is not allowed as a tax deduction.

Another main difference to consider is that the penalty free withdrawal allowances in the traditional IRA are very few and far between. And they are only allowed under very specific circumstances.

In a Roth IRA you are allowed to withdraw any funds contributed after a five year “seasoning” period.

The loose rules of the Roth IRA account make it a perfect candidate for an emergency fund. After the seasoning period of 5 years, you can use the fund to cover any unexpected costs and expenses.

When planning your retirement, make sure to consider all these things.