IRA: roth or traditional

[daria26]

What is the name of your state? NJ

I make 27,000 a year I want to open an IRA account. How does that work? What is Roth? What is better for my income? Where can I find a higher rate? Thank you!

 

[LdiJ]

What is the name of your state? NJ

I make 27,000 a year I want to open an IRA account. How does that work? What is Roth? What is better for my income? Where can I find a higher rate? Thank you!

Here is a link to some good general information on traditional and roth IRAs

http://ohioline.osu.edu/mm-fact/0003.html

 

[Some Random Guy]

The difference between a Roth and traditional IRA is when you pay the taxes.

With a Roth IRA, you put in money that you have already paid taxes on, and then when you go to take your money out for your retirement, you don't pay taxes on the money you put in or on any of the interest.

With a traditional IRA, you put in your money and deduct that from your income on your tax return. This meant that the money in your IRa is not taxed yet. Then, when you retire, you pay taxes on everything you take out of the IRA as if it was current income.

Which is better depends on a lot of details, but I would look into a Roth since your average tax rate now may be a lot lower than when you retire - especially if you thing you will be making more money in the future, or if the US needs to raise its tax rates to pay down its massive debts.