What is the difference between a ROTH, SEP and Traditional IRA?
Answers
2775 points
Oldman answered 10 months ago …
Go to the IRS.gov site and look at the info in their Publication, regarding the differences...basically, below ca. 150000/couple, one can take already taxed money and put it tinto a Roth...where it won't be taxed as it earns divs. int or cgs...and after 5 yrs, and after age 59&1/2, one can withdraw any money -tax-free.
The other 2 are funded before taxes are paid on the deposits, and any withdrawals are taxed as ordinary income.
An SEP is a Simplified Employee Pension plan. Traditional IRAs and SEPs have very different contribution limits and setup systems, but an SEP is one way a small employer can set up a contribution system for an employee, while only the person with earned income can contribute to an IRA (or their spouse can contribute, if the spouse works and has "Earned" income subject to Fed. tax.) The IRS Publication # 590 is quite well written, and covers these points extensively with many examples, because these plans have been around for over 20 years..
2222 points
readytoretire answered 9 months ago …
A SEP is a traditional IRA except that the employer contributes to your IRA account. An employer can contribute between 0 and 15% to each eligible employee each year. The money goes straight into their IRA. Once there, it is the employee's and they treat it like a regular IRA. A ROTH is an IRA that you don't get a deduction up front, but all withdrawals/earnings are tax free (after 59 1/2, of course).
Read more from readytoretire
