Individual Retirement Accounts (IRAs) - kcentv.com - KCEN HD - Waco, Temple, and Killeen

Tell us a little about IRAs.

IRAs are investment accounts that receive favorable tax treatment and are designed to help individuals save for retirement, and Traditional and Roth IRAs are the two most common types of IRA accounts.

What's the difference between Traditional IRAs and Roth IRAs?

Contributions to Traditional IRAs are tax-deductible when made, but withdrawals are taxed as income in retirement. Contributions to Roth IRAs don't reduce your taxes now, but money withdrawn in retirement is tax-free. Regardless of the type of IRA, the account balance will grow tax-free while in the account, helping you accumulate more over time than you would in a taxable investment.

Is it true that Roth IRAs are better for younger investors and that older investors should opt for a Traditional IRA?

There are a lot of exceptions to that "rule of thumb". For example, Roth IRAs avoid required minimum distributions at age 70 ½ that could force you to pay taxes on money you don't even need, and they also offer certain estate-planning benefits.

What's the maximum that someone can contribute to an IRA?

The maximum contribution for 2009 and 2010 is $5,000, or $6,000 if you're 50 or older. But the actual amount you can contribute will "phase out" at certain income levels, and Traditional IRA contributions aren't deductible under certain situations, so get advice if you don't understand the specifics.

Is it too late to make a contribution for 2009?

You can make a 2009 contribution up until April 15th, and can make a 2010 contribution from now until April 15th, 2011.

Remember that these topics are general in nature, so consult with your financial advisor about your specific situation before making any investment decisions.