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4 Main Best IRA Plans

The three main type of IRA accounts. The best IRA plan for you would depend on your circumstances, goals and needs. You may open a Roth IRA account, a traditional IRA or an education IRA which is also called the Coverdell Education Savings Account.

The education IRA will help you save for college, university or post-secondary expenses for your children and other beneficiaries you name if they are under 18 years of age. The contributions cannot exceed $2,000 per year and are after-tax contributions. The education IRA allows for no deductions for contributions; however, the withdrawals may be tax-free and penalty free if you follow the IRA regulations.

The traditional IRA’s main advantage is the contributions you make to this IRA account is tax deductible. The other advantage is the traditional IRA will grow tax-free until the time of withdrawal. There are strict IRA regulations that need to be followed lest you incur heavy tax penalties. For instance, there are mandatory withdrawals amounts once you reach age 70 1/2 and there is a 50% tax penalty of the required minimum distribution for the year if you do not withdraw. Withdrawals of the traditional IRA are all taxable at the current rate of tax during the withdrawal. Traditional IRA contributions are made with before-tax dollars. The contribution limits of the traditional IRA is $5,000 per year with an additional allowance of $1,000 if over age 50.

Could this be the best IRA Plan?

Roth IRAs are fairly simple and most believe it’s the best IRA. The main disadvantage of the Roth IRA is that it is not tax deductible; however, the Roth IRA will grow tax-free and the growth of the investment can never be taxed again. Your contributions made to the Roth IRA account are made with after-tax dollars. The Roth IRA also does not have any minimum age requirements or other forced withdrawal requirements. Similarly to the traditional IRA, the Roth IRA’s contribution limits is $5,000 per year with an additional allowance of $1,000 per year if over age 50. This is perhaps the best IRA.

Best IRA Plan: Roth IRA on Roids

There is another type of Roth IRA called the Roth IRA on Roids which has no contribution limits, no earned income limits, no forced withdrawals, no early withdrawals penalties, the principal is guaranteed and the contributions grow tax-free. There are no estate taxes and the death benefit can be passed on to heirs tax-free if properly planned. There are no age or earned income criteria. The Roth IRA on Roids’ contributions are made with after-tax dollars.

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