Difference Between an IRA and a CD
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Ronny Sikes
Apr 19, 2013, 7:30:03 AM4/19/13
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Article Title: Difference Between an IRA and a CD
Author: Ronny Sikes
Word Count: 521
Article URL: http://www.isnare.com/?aid=507263&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=507263
Easy Publish Tool: http://www.isnare.com/html.php?aid=507263
*********************** ARTICLE START ***********************
Difference Between an IRA and a CD
We all want to enjoy our retirement, but few of us know how to save. There's a lot of technical jargon involved, but the basic concept is simple enough. Differentiating between an IRA and a CD is delicate business, as they are both very much alike. Let us first examine IRAs. There are two types of IRAs, a traditional IRA and a Roth IRA, and the difference between the two is critical.
A traditional IRA (Individual Retirement Account) allows a person to save up for their retirement in a way that's temporarily tax free. If you put money into a traditional IRA it will be deducted from your yearly income, which means the amount won't be subject to taxation. If you are age fifty or over, you can contribute up to four thousand dollars a year into a traditional IRA.
If you withdraw your money from a traditional IRA before you are sixty, you'll get hit with a ten percent penalty. Keep in mind that, regardless of when you decide to take the money out of your traditional IRA, once it's out it's taxable. Occasionally the ten percent fee for early withdrawal is lifted if you're using the money for educational purposes or buying a house.
The second type is called a Roth IRA, named after the Senator William Roth. One big advantage of a Roth IRA is that you can take out your direct contribution (the money you put in minus any profits) tax free whenever the urge strikes you, and you can collect the profits tax free after five years. The disadvantage is that Roth IRAs are not tax deductible, and the money won't be subtracted from your yearly income.
Another disadvantage of choosing a Roth IRA applies to wealthy individuals. Possibly because the Roth IRA was created to lend a helping hand to middle class Americans, there is an income limit that you can't exceed. If you make over one hundred and five thousand dollars per year, a Roth IRA is not for you. For joint filers the limit is one hundred and sixty six thousand dollars.
A CD (Certificate of Deposit) is a way to invest money that is insured by the banks. A CD is viewed as a safe and steady way to make money, as it generates more profit than a savings account but less than some risky investments. The best part about CDs is that they are mostly risk free, but it's important to note that there are strict penalties for withdrawing the cash before the term ends.
Whether it's in a CD, IRA, or a 401k (where your employer contributes money to match your own), you should be putting away at least ten percent of your yearly income for retirement. Saving for retirement is the most important thing a young person can do. We work hard in the hopes that we can enjoy our golden years in financial security, but the only way that's going to happen is if we start now.
About The Author: Ronny Sikes wrote this article for http://www.ratelines.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=507263
*********************** ARTICLE END ***********************
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Message delivered directly to members of the group:
publish-the...@googlegroups.com
*****************************************************************
Please consider this free-reprint article written by:
Ronny Sikes
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=507263
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=507263
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: Difference Between an IRA and a CD
Author: Ronny Sikes
Word Count: 521
Article URL: http://www.isnare.com/?aid=507263&ca=Finances
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=507263
Easy Publish Tool: http://www.isnare.com/html.php?aid=507263
*********************** ARTICLE START ***********************
Difference Between an IRA and a CD
We all want to enjoy our retirement, but few of us know how to save. There's a lot of technical jargon involved, but the basic concept is simple enough. Differentiating between an IRA and a CD is delicate business, as they are both very much alike. Let us first examine IRAs. There are two types of IRAs, a traditional IRA and a Roth IRA, and the difference between the two is critical.
A traditional IRA (Individual Retirement Account) allows a person to save up for their retirement in a way that's temporarily tax free. If you put money into a traditional IRA it will be deducted from your yearly income, which means the amount won't be subject to taxation. If you are age fifty or over, you can contribute up to four thousand dollars a year into a traditional IRA.
If you withdraw your money from a traditional IRA before you are sixty, you'll get hit with a ten percent penalty. Keep in mind that, regardless of when you decide to take the money out of your traditional IRA, once it's out it's taxable. Occasionally the ten percent fee for early withdrawal is lifted if you're using the money for educational purposes or buying a house.
The second type is called a Roth IRA, named after the Senator William Roth. One big advantage of a Roth IRA is that you can take out your direct contribution (the money you put in minus any profits) tax free whenever the urge strikes you, and you can collect the profits tax free after five years. The disadvantage is that Roth IRAs are not tax deductible, and the money won't be subtracted from your yearly income.
Another disadvantage of choosing a Roth IRA applies to wealthy individuals. Possibly because the Roth IRA was created to lend a helping hand to middle class Americans, there is an income limit that you can't exceed. If you make over one hundred and five thousand dollars per year, a Roth IRA is not for you. For joint filers the limit is one hundred and sixty six thousand dollars.
A CD (Certificate of Deposit) is a way to invest money that is insured by the banks. A CD is viewed as a safe and steady way to make money, as it generates more profit than a savings account but less than some risky investments. The best part about CDs is that they are mostly risk free, but it's important to note that there are strict penalties for withdrawing the cash before the term ends.
Whether it's in a CD, IRA, or a 401k (where your employer contributes money to match your own), you should be putting away at least ten percent of your yearly income for retirement. Saving for retirement is the most important thing a young person can do. We work hard in the hopes that we can enjoy our golden years in financial security, but the only way that's going to happen is if we start now.
About The Author: Ronny Sikes wrote this article for http://www.ratelines.com
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=507263
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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