Traditional & Roth IRA's
Basics of an IRA
An IRA ( Individual Retirement Account ) is designed for retirement savings and can be a vehicle for accumulating retirement funds and also for distributions when you are ready to retire. You can either rollover / transfer existing qualified plans or you can make contributions up to a determined amount yearly. Your money has tax deferred growth potential while in these accounts.
Difference's between Traditional and a Roth IRA.
The main difference is when you pay income taxes on the money you put in the plans. With a traditional IRA, you pay the taxes on the back end - that is, when you withdraw the money in retirement. With a Roth IRA, it's the exact opposite. You pay the taxes on the front end, but there are no taxes on the back end. While almost anyone with earned income can contribute to a traditional IRA, there are income limits for contributing to a Roth IRA. So not everyone can take advantage of them.
With a Roth IRA, you can leave the money in for as long as you want, allowing for growth potential as you get older. With a traditional IRA, by contrast, you must start withdrawing the money by the time you reach age 701/2.