2.Roth IRA
A Roth IRA differs from a Traditional IRA in that contributions cannot be deducted from income or taxed. However, the growth or investment income in the account is tax-free. The key distinction between Traditional and Roth IRAs is that Traditional IRAs are “tax-deferred,” whereas Roth IRAs are “tax-paid upfront.” Additionally, as long as the account has been open for five years and you are over 59.5 years old, the portion of earnings withdrawn is federally tax-free, and contributions can be withdrawn at any time without federal tax or penalty, and there are no required minimum distributions, and withdrawals for beneficiaries are also tax-free.
The contribution limits for Roth IRA are the same as Traditional IRA, capped at $6,500 for individuals and $7,500 if you’re age 50 or older (for 2024, it’s $7,000 for individuals and $8,000 for those aged 50 or
older).
