From the course: Planning for Retirement

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Roth vs. traditional savings accounts

Roth vs. traditional savings accounts

From the course: Planning for Retirement

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Roth vs. traditional savings accounts

- Whether you're saving through an employer sponsored plan or in your own IRA, you might be wondering whether it makes more sense to save in a Roth account or a traditional account. In this lesson, I'll walk you through the differences between Roth and traditional accounts and help you determine which one might be the best fit for you. The main difference between traditional and Roth contributions to a retirement account is when you get your tax benefits. With a traditional account, whether it's a traditional 401K or a traditional IRA, you have the opportunity to make tax deductible contributions. That means that you don't have to pay income tax on the money that you contribute to your traditional retirement account. So if you make a 100,000 annually and you contribute 10,000 to your 401k at work this year, you'll only have to pay income tax on $90,000 of your income. This example is a bit oversimplified but you get the…

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