Traditional vs. Roth
01.Tax Now vs. Tax Later
Retirement accounts come in two main flavors: Traditional and Roth. Traditional accounts give you a tax discount today. The money you put in is subtracted from your income tax bill. But you have to pay taxes when you take the money out in retirement.
02.The Roth Advantage
Roth accounts are the opposite. You pay taxes on the money today, but when you retire, all the money (including the massive compound growth) is completely tax-free! For kids, who usually earn very little and pay almost no taxes, the Roth option is always the best.
03.Choosing the Right path
Understanding the difference between tax now and tax later helps adults plan their retirement to minimize their taxes over their lifetimes.