Quote:
|
Originally Posted by yellowmac
How is it not tax free? Am I missing something? My understanding is that as long as you withdraw the earnings after age 59 1/2 and the account has been open for 5 years, those earnings are tax free. If you withdraw your earnings early, that's when you get hit with taxes and penalties, though there are some exceptions. You can always withdraw what you've contributed to the IRA at any time without penalty.
|
Sorry Roth IRA you pay tax before you get in, so it is taxed before not after. So to put in 3000 for instance costs you more since it is 3000 posttax, but you pay nothing at the end. Which is better.
Other IRA & 401k is taxed after not before. Which means you end up paying more taxes at the end.
But as Cynthetiq said, if you do not live you paid taxes either way on it. Personally I have a 401k plan and a Roth. If your company has a matching plan in retirement, you should use it since that is part of their salary to you. They figure out how much you are worth and a good portion of it is the benefits, including the 'free' money (not free since they plan it but most of us see it that way sadly) they will put in your retirement.