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The investments within a Traditional IRA grow tax-deferred, meaning you won’t pay taxes on the earnings until you withdraw the money at retirement starting at age 59 1/2, and depending on your income and whether you or your spouse is covered by a retirement plan at work your contributions may even be tax deductible. This means you can potentially lower your taxable income in the year you make the contribution.
Are your contributions tax deductible?
Learn more about the differences between a Traditional IRA and a Roth
A Roth IRA offers tax-free growth and tax-free withdrawals in retirement, but unlike a Traditional IRA, contributions are made with after-tax dollars, meaning they are not tax-deductible. However, the big advantage is that your withdrawals in retirement are completely tax-free, which can be really helpful if you expect to be in a higher tax bracket in retirement.
Also, Roth IRAs do not have Required Minimum Distributions (RMDs) after 73 years of age - like regular IRAs - allowing your investments to grow tax-free for as long as you want.
Does your income allow you to open a Roth IRA?
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