“Comparing Roth and Traditional IRA Benefits for High School Students”

– Roth IRAs require you to pay taxes upfront on your contributions, while traditional IRAs provide tax deductions on contributions up to a certain income level.
– Money invested in both types of IRAs grows tax-free.
– Withdrawals from a Roth IRA are not taxed, while distributions from a traditional IRA in retirement are taxed as income.
– Roth IRA eligibility is based on income level, while anyone can contribute to a traditional IRA regardless of income level.
– Traditional IRAs have required minimum distributions starting at age 72, while Roth IRAs do not have this requirement. – A person’s tax rate, both now and in retirement, should be considered when choosing between a Roth and traditional IRA, aiming to pay the least in taxes.
– Life events, such as moving into a higher income tax bracket, getting married, having children, or planning to pass on wealth, can impact the choice between a Roth and traditional IRA.
– The age at which a person plans to start using their retirement funds is important, as a traditional IRA comes with penalties for early withdrawals, while a Roth IRA allows penalty-free withdrawals of contributions at any age. – Traditional IRAs offer tax-deferred contributions, meaning you can deduct contributions from your taxes, but you’ll pay taxes when you withdraw funds in retirement.
– Roth IRAs offer tax-free withdrawals in retirement, but contributions are made with after-tax dollars.
– The right option for you depends on your current tax situation and your expectations for retirement.

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