What's the Difference Between Front-Loaded and Back-Loaded Retirement Accounts?
No matter your lifestyle or income level, it's critical to start saving for retirement as early on in your career as possible. The more time you give your money to grow, the greater your chances of amassing a substantial nest egg. The question is: Which type of retirement savings plan is right for you?
In fact, you may be torn between a front-loaded retirement account and a back-loaded account. Not sure what the difference is between the two? It all boils down to when you end up paying taxes on your money. With a front-loaded account, such as a traditional IRA, the money you contribute goes in tax-free, but withdrawals are taxed in retirement. With a back-loaded account, like a Roth IRA, the money you contribute is taxed, but withdrawals in retirement are taken tax-free. Each option has its own set of advantages and drawbacks, and so it pays to understand these pros and cons when deciding where to house your retirement funds.
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Source: Fool.com
