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Module 2
ROTH IRAs
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ROTH IRAs
Named for U.S. Senator William Roth, former chairman of the Senate Finance Committee, Roth IRAs differ fundamentally from “traditional” IRAs. Any contribution to a “Roth IRA” is not tax- deductible. The earnings in the account grow tax-deferred. With a few restrictions, all distributions from the account are tax-free. In a traditional IRA, the tax benefits occur when deductible contributions are made and as the earnings grow tax deferred. The tax benefits in Roth IRA occur as the account grows and when funds are evenutally withdrawn. Due to the delayed nature of the tax advantages, Roth IRAs have been called “backloaded” IRAs.
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