A traditional IRA is a tax-deferred retirement savings account, meaning contributions are made with pre-tax dollars, and taxes are paid when funds are withdrawn in retirement. On the other hand, a Roth IRA is funded with after-tax dollars, but qualified withdrawals are tax-free in retirement. Traditional IRAs require account holders to start taking required minimum distributions (RMDs) at age 72, while Roth IRAs do not have a required minimum distribution age. Additionally, there are income eligibility limits for contributing to a Roth IRA.
How do mortgages work?
Mortgages are loans taken out to purchase a property. The borrower (mortgagor) agrees to repay the loan over a certain period of time with interest to the lender (mortgagee). The mortgage is secured against the property, which means that if the borrower fails to make repayments, the lender has the right to repossess the property […]
What is the difference between a stock and a mutual fund?
A stock is a share in the ownership of a single company, representing a small fraction of the company’s total value. On the other hand, a mutual fund is a collection of stocks, bonds or other assets owned by many investors and managed by a professional investment company. The idea behind a mutual fund is […]
What is the role of insurance in personal finance?
Insurance plays an important role in personal finance by providing protection against the financial risks associated with unforeseen events such as accidents, illnesses, natural disasters, theft, and loss of income due to disability. Insurance helps individuals and families to manage their financial risks by transferring them to the insurance company in exchange for a premium […]