OK so let's say that you have $100 in your bank account. And you wanna save it because your bank told you that if you open a CD or traditional IRA (or even just keep it in your savings account) you'll earn interest on your money...and the longer you leave it in there the more interest it'll gain right ?
What they don't tell you is that even if you are getting a 1-3% return on your money every year, those same $100 dollars will only be worth about $40-60 in about 10 years (maybe less). So even if you gained that "solid" 1-3% every year, this year you'll only earn $1-3 dollars...next year you'll earn less because of inflation...and so on and so on. NOT TO MENTION, when you go to cash out Uncle Sam will keep a very big chunk of your hard earned money.
Doesn't sound like such a smart move anymore does it? So in 20-50 years, when you're ready to retire and wanna use that money you'll actually lose money....A LOT.
That being said.... Here's the main difference between Traditional and Roth IRAs:
Traditional: every contribution you make towards your IRA will be tax deductible now...but when you go to cash out for retirement, you'll barely have anything left because like I said, Inflation and Uncle Sam will take most (and I mean MOST) of your $$$. And if federal tax rates sky rocket in the next 20-40 years, you probably won't get anything back. Inflation will take half your money and Uncle Sam will take the rest.
Here's the one you want....a Roth IRA. Why?
Because although contributions (payments) aren't tax deductible NOW, Uncle Sam can't touch your money when you cash out..not a dime! So when you cash out for retirement you'll get all of your money (minus inflation of course), plus that 1-3% interest added (or whatever interest rates your bank offers) .
So even though we can't escape inflation, we can make wise investments to minimize our losses.
So there it is.....go to your bank and ask them about a #RothIRA. There are different types according to your tax bracket...I won't get into that subject though 😉 Good luck
Disclaimer: Im just an average guy who loves finances. I am not a financial advisor so please seek professional advice before making any kind of investments.