Would you be more favorably inclined to advise a 30-year-old individual to establish a traditional deductible IRA or a Roth IRA? Explain. Consider any tax problems involved if the IRA funds are needed before age 59 1/2. Would your answer chan individual? Would you be more favorably inclined to advise a 30-year-old individual to establish a traditional deductible IRA or a Roth IRA? Consider any tax problems involved if the IRA funds are needed before age 59 1/2. Most tax advisors would advise a 30-year old individual to establish

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**Understanding IRA Options for a 30-year-old**

**Question:**
Would you be more favorably inclined to advise a 30-year-old individual to establish a traditional deductible IRA or a Roth IRA? Explain. Consider any tax problems involved if the IRA funds are needed before age 59 1/2. Would your answer change for a 55-year-old individual?

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**Advice for 30-year-olds:**

Most tax advisors would suggest a 30-year-old individual establish:

- **Option A: A Roth IRA rather than a traditional deductible IRA.** The main reason is that contributions to a Roth IRA are non-deductible, but both contributions and earnings grow tax-free. Given that the 30-year-old has 30 years before distributions are eligible to be made, a Roth IRA should experience significant growth, and all future distributions are not subject to tax. If there is an emergency and the funds are needed before age 59 1/2, contributions can usually be withdrawn without being subjected to taxation.

- **Option B: A Roth IRA rather than a traditional deductible IRA.** The primary advantage here is that contributions to the Roth IRA are deductible, and the earnings grow tax-free. With nearly 30 years until eligible distributions, this setup allows significant growth, keeping future distributions tax-free. In an emergency where funds are needed early, contributions may still be withdrawn without tax penalties.

- **Option C: A traditional deductible IRA rather than a Roth IRA.** The major benefit is the deductibility of contributions, with both contributions and earnings growing tax-free. Significant growth can occur over 30 years, and future distributions remain untaxed. If funds are needed before age 59 1/2 in an emergency, contributions can generally be withdrawn without tax implications.

- **Option D: A traditional deductible IRA rather than a Roth IRA.** Here, contributions to the Roth IRA are non-deductible, but tax-free growth applies. With 30 years of potential growth, future distributions remain untaxed. In emergencies, early withdrawal of funds doesn't typically incur taxes.

**Diagram Explanation:**

No diagrams or graphs are present to explain further. The text focuses on narrative explanation regarding IRA types and their implications for different age groups.
Transcribed Image Text:**Understanding IRA Options for a 30-year-old** **Question:** Would you be more favorably inclined to advise a 30-year-old individual to establish a traditional deductible IRA or a Roth IRA? Explain. Consider any tax problems involved if the IRA funds are needed before age 59 1/2. Would your answer change for a 55-year-old individual? --- **Advice for 30-year-olds:** Most tax advisors would suggest a 30-year-old individual establish: - **Option A: A Roth IRA rather than a traditional deductible IRA.** The main reason is that contributions to a Roth IRA are non-deductible, but both contributions and earnings grow tax-free. Given that the 30-year-old has 30 years before distributions are eligible to be made, a Roth IRA should experience significant growth, and all future distributions are not subject to tax. If there is an emergency and the funds are needed before age 59 1/2, contributions can usually be withdrawn without being subjected to taxation. - **Option B: A Roth IRA rather than a traditional deductible IRA.** The primary advantage here is that contributions to the Roth IRA are deductible, and the earnings grow tax-free. With nearly 30 years until eligible distributions, this setup allows significant growth, keeping future distributions tax-free. In an emergency where funds are needed early, contributions may still be withdrawn without tax penalties. - **Option C: A traditional deductible IRA rather than a Roth IRA.** The major benefit is the deductibility of contributions, with both contributions and earnings growing tax-free. Significant growth can occur over 30 years, and future distributions remain untaxed. If funds are needed before age 59 1/2 in an emergency, contributions can generally be withdrawn without tax implications. - **Option D: A traditional deductible IRA rather than a Roth IRA.** Here, contributions to the Roth IRA are non-deductible, but tax-free growth applies. With 30 years of potential growth, future distributions remain untaxed. In emergencies, early withdrawal of funds doesn't typically incur taxes. **Diagram Explanation:** No diagrams or graphs are present to explain further. The text focuses on narrative explanation regarding IRA types and their implications for different age groups.
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