What's the difference between a savings account and a Roth IRA?

Retirement Savings, IRAs
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April 2017
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Put simply, a basic savings account is typically considered an account that you open at an FDIC insured bank that earns interest, and that interest is taxed by the government each year that it's earned. Usually, a savings account is attached to a checking account, so folks can transfer money into checking to pay bills. A more technical term for this type of account is a "non-qualified" account, since the earnings are not qualified for any type of tax haven treatment.

By comparison, a Roth IRA is a "qualified" account that allows certain tax-filers the ability to deposit money today and defer paying taxes on those funds in retirement (for more info on Roth IRAscheck out this IRS page). There are income thresholds that dictate how much you can, if at all, contribute to these types of accounts. Once you contribute, there are many investment options from FDIC insured savings to aggressive investment options.

April 2017
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