Traditional IRA or Roth IRA – Which one should you contribute to?
Everyone has an opinion but nobody has a definitive answer.
This article shows that there is a clear winner for people who plan to retire early.
And if you choose the right option, you could accumulate an extra $100,000 over the course of your lifetime!
Types of Retirement Accounts
Before I get into the specifics, let me first recap the two major types of retirement accounts.
Tax-Free-Contribution accounts are the most-common type and have the following characteristics:
Funded with pre-tax (i.e. untaxed) dollars Grow tax free Taxed at withdrawal
Here’s a simple illustration showing when your money gets taxed:
Traditional IRAs, 401(k)s, and 403(b)s are all examples of this type of retirement account.
Tax-Free-Withdrawal accounts, on the other hand, are:
Roth IRAs and Roth 401(k)s are examples of this type of retirement account.
Both options are good because they provide some tax benefits that allow your investments to grow faster than they would if simply invested in a normal taxable account.
Here’s what a