Retirement Accounts

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What is a Traditional IRA?

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A Traditional IRA (Individual Retirement Account) is a retirement savings account where contributions are made with pre-tax dollars, meaning you do not pay taxes on the money until you withdraw it during retirement.

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What is a Roth IRA?

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A Roth IRA is a retirement savings account where contributions are made with after-tax dollars, meaning you pay taxes on the money before you invest it, and qualified withdrawals during retirement are tax-free.

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What is the main tax advantage of a Traditional IRA?

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The main tax advantage of a Traditional IRA is that contributions are tax-deductible, reducing your taxable income in the year you contribute.

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What is the main tax advantage of a Roth IRA?

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The main tax advantage of a Roth IRA is that qualified withdrawals are tax-free, allowing for tax-free growth on your investments.

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When is it beneficial to choose a Roth IRA over a Traditional IRA?

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It is beneficial to choose a Roth IRA if you expect to be in a higher tax bracket during retirement than you are currently.

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What is an Individual Retirement Account (IRA)?

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An Individual Retirement Account (IRA) is a type of savings account that is designed to help individuals save for retirement with tax advantages.

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What is a 401(k) plan?

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A 401(k) plan is an employer-sponsored retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out.

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Can you take loans from a 401(k)?

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Yes, you can take loans from a 401(k) plan, but you must repay the loan with interest within a specified time frame.

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What is the penalty for early withdrawal from a Traditional IRA?

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The penalty for early withdrawal from a Traditional IRA (before age 59½) is typically 10% of the amount withdrawn, in addition to regular income tax.

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What is the contribution limit for IRAs in 2023?

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The contribution limit for IRAs in 2023 is $6,500, or $7,500 if you are age 50 or older.