The Roth IRA Advantage
I never really understood what the difference was between a Roth IRA and a traditional 401k or other long term investment fund, and I guess it all has to do with taxes (yay – love taxes, they’re so easy to understand).
Here it goes : The biggest different between a Roth IRA and a 401k is how you are taxed. On a Roth fund, you are taxed up front, which means if you anticipate being in a higher tax bracket at retirement time, you are better off with a Roth IRA.
This way, you pay lower taxes up front rather than getting taxed at much higher rates at retirement, when you’re in that higher tax bracket.
Just another thing to consider. Most financial analysts will tell you to shake it up a little – put some in a Roth IRA, and some in other funds, to diversify.
