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re: Roth IRA vs Traditional Savings Account
Posted on 2/3/14 at 1:02 pm to jimbeam
Posted on 2/3/14 at 1:02 pm to jimbeam
quote:
Can we sticky this?
I'd like a couple other more tax-savvy folks than myself to look it over first and maybe cut the part about my own personal tax mistakes.
I think they're both tax-advantaged, just in different ways. Traditional IRA, you save your highest income tax bracket on the top, so in my example of putting $4,000 in a traditional IRA, you really contributed $2,760 cash (baking in tax savings based on the 25% federal income tax bracket and in the case of LA 6%), but invested $4,000 to compound until you retire.
With the Roth, assuming the government doesn't change the current rules, it grows tax free and can be inherited without generating a tax liability.
The important thing is to sock money away now while single, because it'll be a great deterrent with the tax laws from keeping an eventual old lady from spending it on shopping.
This post was edited on 2/3/14 at 1:04 pm
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