Question

Financial Algebra help!

Maggie is a 25-year old woman entering the workforce. She plans to start investing in an IRA right away, contributing as much as she can throughout her career. Now, and for several years while she is just starting out in her line of work, Maggie’s income level is not particularly high so she is in one of the lower tax brackets. At this point, which type of IRA would be best for Maggie, a Traditional or Roth IRA? Explain your reasoning using complete sentences.

I want to say that she should go with a Roth IRA, but not sure how to explain my reasoning.

Answer 1

@ganeshie8 Me again! lol Think you could help?

Answer 2

what is meaning of ira

Answer 3

Roth IRA requires her to pay the taxes right away.
Traditional IRA allows her to pay the taxes in the end during retirement.

Answer 4

Let me rephrase it a bit, cuz we will be supporting Roth IRA itself :)

Answer 5

So, it would probably be better for her to go with a traditional IRA then, right?

Answer 6

Oh okay (:

Answer 7

Roth IRA allows her to pay the taxes right away.
Traditional IRA requires her to pay the taxes in the end during retirement over the accumulated money.

Answer 8

Since she is in low tax bracket, it is a wise thing to pay the taxes now itself so that she doesnt have to pay the huge taxes when she retires... Most likely she will fall in a high tax bracket when she retires. So paying taxes now is the best thing to do.

Answer 9

So, +1 for Roth IRA !

Answer 10

lol I'm glad to know I was right! Thanks for explaining it to me!

Answer 11

good :) u wlc :))