ECONOMICS
MONEY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Traditional
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Roth
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Either A or B
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None of the above
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Detailed explanation-1: -With a Traditional IRA, you contribute pre-or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.
Detailed explanation-2: -With a Traditional IRA, your money can grow tax deferred, but you’ll pay ordinary income tax on your withdrawals, and you must start taking distributions after age 73.
Detailed explanation-3: -With a Roth IRA (Individual Retirement Account), you save and grow your retirement investments tax-deferred, and pay no tax on the withdrawals after you retire, as long as the account has been open for at least five years. There are no age requirements for withdrawals and contributions.
Detailed explanation-4: -The three main types of IRAs are traditional IRAs, Roth IRAs and rollover IRAs. Traditional IRAs are funded with pretax dollars, while Roth IRA contributions are made after taxes. A rollover IRA is an IRA funded with money from a former employer-sponsored 401(k) that doesn’t incur early withdrawal penalties.
Detailed explanation-5: -A regular contribution is the annual contribution you’re allowed to make to a traditional or Roth IRA: up to $6, 000 for 2020-2021, $7, 000 if you’re 50 or older (see IRA Contribution Limits for details). It does not include a conversion or any other rollover.