There are many types of IRAs. But two of the most common are the traditional IRA and the Roth IRA. The type of account you select can have a significant impact on your long-term household savings.
The biggest difference between a traditional IRA and Roth IRA is their classifications in the IRS tax code. A traditional IRA is a “qualified plan,” which means that money going into it has pre-tax status. On the other hand, a Roth IRA is a “non-qualified plan.” This means that the account is funded with after-tax dollars. The qualified and non-qualified classifications also mean both types of accounts have different rules for required minimum distributions.
Because of this difference and others, it’s important to understand the fundamentals behind these two plans. This brief discussion will help you understand their distinctions, their eligibility criteria, and other important factors. Let’s get into it.
nd the fundamentals behind these two plans. This brief discussion will help you understand their distinctions, their eligibility criteria, and other important factors. Let’s get into it.
