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Moneywise

401(k) vs. IRA: 5 key differences

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  • AreaReader Suburbs, AZ
    Jan. 30, 2014 1:49 p.m.

    The author of the article does readers the disservice of not distinguishing between a Traditional IRA and a Roth IRA. She seems to be talking about a Traditional IRA.

    This is a major oversight, because for many people in the normal income ranges in Utah, a Roth IRA will be a clear choice over a Traditional IRA.

  • Liberal Ted Salt Lake City, UT
    Jan. 31, 2014 6:30 a.m.

    "The beauty of these retirement savings accounts is that your contributions are pre-tax, meaning those funds aren't subject to federal income taxes before they're withdrawn in retirement."

    Maybe I misunderstood, but, when the author says "pre-tax" it sounds like you can buy into an IRA before you're taxed on your check. Which isn't true. You pay your taxes first, then from your net you can buy into an IRA. When you withdraw money from the IRA, you are not taxed.

    Whereas the 401k you can pay into with your gross pay check, and then you're taxed later when you withdraw money.

  • CJH Alpine, UT
    Jan. 31, 2014 5:54 p.m.

    Contributions to a traditional IRA reduce your taxable income for the year you make the contribution. The account grows without being taxed each year; however, when you begin taking distributions once you retire this money is taxed as ordinary income. Contributions to a Roth IRA do not reduce your taxable income for the year you make the contribution. The account grows tax free. There are no taxes on the money you take from this IRA once you retire.