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Originally posted by NoSoup
Yakk -
Indeed, they sound similar, but the money in an American "traditional" (non-roth) IRA is pre-tax dollars, so money that has not been taxed yet.
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Pre-tax or getting a tax deduction (income deduction, more precicely) is the same thing, different pile.
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If you prematurely take out the money here, you are not only taxed on the dollars you take out, but you also are required to pay a penalty ( I believe 20%) to do so. However, there are certain "qualifying" reasons to withdraw the money prematurely and not pay taxes or get penalized. Buying your first home, medical expenses, ect are included in those "qualifying" reasons.
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Is there any limit to how much money you can put into an IRA?