FrugalFran wrote:

Lexie wrote: Good to know FRANKN. Thanks! I'm still waiting on my check from the 401K so I can put things in motion. What about the interest on a ROTH? Is that taxable?

That's a good question, Lexie. I would also like to know what the return comparison is like between a 401K and an IRA. Historically, does one do better than the other?

Anything WITHIN the IRA (whether its a Roth or traditional) is being accumulated tax free.

Lexie wrote: Good to know FRANKN. Thanks! I'm still waiting on my check from the 401K so I can put things in motion. What about the interest on a ROTH? Is that taxable?

That's a good question, Lexie. I would also like to know what the return comparison is like between a 401K and an IRA. Historically, does one do better than the other?

Good to know FRANKN. Thanks! I'm still waiting on my check from the 401K so I can put things in motion. What about the interest on a ROTH? Is that taxable?

ROTH IRA will never be taxed again. Since you contribute with after-tax dollars, you have already paid the taxes on it. Its all tax free after that.

So... A Roth IRA is money that has already been taxed and the only taxable amount is on the money made while in the Roth? I'm getting ready to roll over a 401K into an IRA or a Roth IRA and I need to know which will be better.

I actually don't believe that is true. The only difference between a ROTH IRA and a Traditional IRA is:

Roth IRAs are deposited with after-tax dollars (so you do not get the deduction when you make the deposit), but when you withdraw from the ROTH IRA in retirement, you will not be taxed (because you have already paid taxes on the money you invested)
Traditional IRAs: You get to deduct your contributions day 1 (subject to limitations depending on how much money you make) and then when you withdraw your money, you will have to pay taxes on your withdrawals.

Both IRAs are actually tax deferred while the money is in the IRA. The differences are around the contributions and withdrawals.

That's a good point, Breakinger. I have a traditional IRA that I've been wanting to change over to a Roth and your point just sealed the deal for me. I don't see any point in forcing a retiree to make withdrawals if they aren't wanted or needed.

Another benefit is that you can still add money to it after you reach the age of 70 1/2. They don't force you to take the money that you have saved and start paying taxes on it like a traditional IRA.

The main benefit of putting your retirement savings into a Roth IRA is that the money grows tax free. If you put in $10,000 per year, this could really add up. Can anyone think of more positives to a Roth?

https://investor.vanguard.com/ira/roth-conversion