Retirement Accounts

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What is a Traditional IRA?

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A Traditional IRA (Individual Retirement Account) allows individuals to make tax-deductible contributions, with taxes deferred until withdrawal during retirement.

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What is a Roth IRA?

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A Roth IRA allows individuals to contribute after-tax income, meaning contributions are taxed upfront, but withdrawals during retirement are tax-free.

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

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The penalty for early withdrawal (before age 59½) is typically 10% of the amount withdrawn, in addition to regular income tax.

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At what age can you start withdrawing from a Traditional IRA without penalty?

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You can start withdrawing from a Traditional IRA without penalty at age 59½.

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What is the maximum contribution limit for a Traditional IRA in 2023?

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

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How much can you borrow from your 401(k)?

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You can borrow up to 50% of your vested balance or $50,000, whichever is less.

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What is the tax advantage of contributing to a Traditional IRA?

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Contributions to a Traditional IRA may be tax-deductible, reducing your taxable income for the year.

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What is the tax advantage of contributing to a Roth IRA?

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Contributions to a Roth IRA are made with after-tax dollars, allowing for tax-free withdrawals in retirement.

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When should you start saving for retirement?

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You should start saving for retirement as soon as you get your first job.

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What is the difference between a Traditional IRA and a Roth IRA regarding taxation?

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In a Traditional IRA, contributions are tax-deferred until withdrawal; in a Roth IRA, contributions are taxed upfront.