Answered: Accounting Question

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Step 1

Individual Retirement Account:

IRA is a tax-advantaged investing tool which is used by the individuals to earmark the funds for their retirement savings. There are various IRA’s. They are Traditional IRA and Roth IRA and SEP IRA and SIMPLE IRA’s.

The difference between IRA and Roth IRA is as follows:

In Roth IRA the maximum limit of yearly income is $125000. Single people exceeding this limit are not entitled for this scheme. In case of IRA there is no such limit.
In Roth IRA one has to invest till any age but in regular IRA only has to invest till age of seventy and half.
Regular IRA is tax deductible whereas Roth IRA is not tax deductible.
In Roth IRA one can withdraw money tax free whereas there is no tax free money in Regular IRA
One can convert regular IRA to Roth IRA.