IRA

Question by MeadowyRavine Reward: Log in to view Status: Answered
Is a Roth or a traditional IRA a better investment? How do I set up an IRA? How do I tell what interest rate I will earn with a given IRA?



Reply from Dave Accepted answer! User Rating:  84 Knowledge Tokens
The answer differs for each person since numerous factors are involved. The major difference between the two is that with a Traditional IRA your contributions are tax-deferred. You don't pay taxes until you withdraw the funds. With a Roth IRA your contributions are made with after-tax dollars.

You should use a calculator such as the following to determine which type of IRA may be your best bet:
http://partners.leadfusion.com/tools/motleyfool/rothira01a/tool.fcs
The rate of return you receive is dependant on the type of investments you select. For the period between 1970 through 2005 the average compounded rate of return for the S&P 500 was about 11.5% per year. But those figures are not necessarily indicative of future returns. You should use a figure between 7% - 8% when you do your calculations just to be safe.


You can set up a Roth IRA easily through most investment companies like Vanguard, Fidelity, or T Rowe Price.
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