Traditional and Roth IRA: Which is Most Advantageous to Taxpayers?

Essay Instructions:

Both nondeductible contributions to a traditional IRA and contributions to a Roth IRA are similar in the sense that neither provides a tax deduction at the date of contribution. Which of the two types would be most advantageous to taxpayers and why?

Your client is about to establish his own business and hires at least 10 employees. He asks you for advice concerning establishing a qualified versus a non-qualified retirement plan. What do you advise your client? Would your answer change if you were a potential employee? Why or why not?

Essay Sample Content Preview:

Traditional IRA vs. Roth IRA
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What would be most beneficial to taxpayers between traditional IRA and Roth IRA, and why?
The most advantageous Individual Retirement Account (IRA) for a taxpayer is the Roth IRA. Roth IRA allows an individual to make contributions after-tax, especially when in low tax brackets and enjoy back-loaded tax benefits upon retirement by withdrawing the contributions tax-free. It offers flexible early withdrawal guidelines whereby one can withdraw their contributions before the age of sixty without incurring any penalties or taxes (Adelman & Cross, 2010, pp. 268-271). The account has fewer restrictions, thus allowing one to let their savings stay in the account and accumulate more interest without pushing minimum distribution rules.
Advice on either a qualified vs. a non-qualified retirement plan
I would advise my client to establish a qualified retirement plan. A qualified retirement plan is a program established under the Employment Retirement Income Security Act (ERISA), which seeks to protect workers' retirement income through strict guidelines. Thus, my client will not struggle to develop and organize a ...

Updated on January 26, 2024

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