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Investing in 2024 for Gen Z and Millennials
Snowball Team
The type of retirement account you choose can significantly impact your future savings. An IRA is an individual retirement account that you can set up at a financial institution that helps you save and invest for retirement (it is not through your employer). It’s really important to understand the differences between a traditional IRA vs. a Roth IRA to choose the best one for you. We lay out some of the differences:
Traditional IRA: Anyone with an earned income and younger than 70 1/2 can contribute
Roth IRA: Those with an earned income under a certain amount (with no age limit) can contribute (see below)
Traditional IRA: Tax deduction is in the contribution year and will depend on your personal tax situation (e.g., income limits and participation in an employer retirement account)
Roth IRA: No tax deduction in the contribution year
Traditional IRA: Your contributions and earnings will be taxed as ordinary income when withdrawn
Roth IRA: Your contributions and earnings are tax free when withdrawn
Traditional IRA: Your contributions and earnings can be withdrawn penalty free beginning at age 59 1/2. Distributions must begin at age 70 1/2.
Roth IRA: Your contributions can be withdrawn at any time tax and penalty free. Your earnings can be withdrawn penalty and tax free if you are over 59 1/2 and have had the Roth IRA for at least five years. No withdrawals are required during your lifetime.