Now, to my very limited understanding of IRAs, they are basically very similar funds, but they have their differences.
Differences include (but DEFINATELY are not limited to) :
-
A ROTH IRA is Post-Tax, which means you put money into it AFTER taxes have already been taken out. Doing this cuts into the amount you bring home a lot more, but saves you from an unknown tax situation in the future.
-
A ROTH IRA is also something that you can take money out on (without penalty) if you want to do certain things, like buy a home. I don’t know whatelse you can do without a penalty, but I know buying a home is one.
-
A Traditional IRA is Pre-Tax. You get taxed a percentage that is determined when you take out the money (when you retire). The benefit of this situation is, if you draw enough from your salary and put it into your IRA, you can move tax brackets. So let’s say you make $74,500 a year, and you drop $5k into the IRA account (I’m pretty sure it’s around $5k Max a year right now for IRAs). That’s PRE-TAX, so they tax you on only $69K a year, which will drop you to a different tax bracket. (In this case, if you lived in NY and were single, your state income tax would stay the same, but your federal would drop 3%)
For NYS :
If your income range is between $0 and $8,000, your tax rate on every dollar of income earned is 4%.
If your income range is between $8,001 and $11,000, your tax rate on every dollar of income earned is 4.5%.
If your income range is between $11,001 and $13,000, your tax rate on every dollar of income earned is 5.25%.
If your income range is between $13,001 and $20,000, your tax rate on every dollar of income earned is 5.9%.
If your income range is between $20,001 and $100,000, your tax rate on every dollar of income earned is 6.85%.
If your income range is between $100,001 and $500,000, your tax rate on every dollar of income earned is 7.375%.
If your income range is $500,001 and over, your tax rate on every dollar of income earned is 7.7%.
For Federal Tax Brackets :
Marginal Tax RateSingleMarried Filing Jointly or Qualified
Widow(er)Married Filing SeparatelyHead of Household10%$0-$7,150 $0-$14,300 $0-$7,150 $0-$10,200 15%$7,151-$29,050 $14,301-$58,100 $7,151-$29,050 $10,201-$38,900 25%$29,051-$70,350 $58,101-$117,250 $29,051-$58,625 $38,901-$100,500 28%$70,351-$146,750 $117,251-$178,650 $58,626-$89,325 $100,501-$162,700 33%$146,751-$319,100 $178,651-$319,100 $89,326-$159,550 $162,701-$319,100 35%Over $319,100 Over $319,100 Over $159,550 Over $319,100
I don’t know any other significant differences.
And again, this is only from what I gathered from a couple short-ish convos with some financial peeps. I’m asking about it right now.
Obviously, feel free to add whatever you want.
I’m trying to figure out what the hell to start.