Budget Do's, Finance

What’s the Difference Between a Roth IRA and an IRA?

July 19, 2012
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You know you should be saving for retirement but we get it, sometimes the savings-options just get a bit overwhelming, which is why we’ve created an easy cheat sheet on the differences between two retirement options: Roth IRA and IRA.

The main difference between the two is just when you pay income taxes on the money you put in each.

Traditional IRA: You pay when you take the money out in retirement.

Roth IRA: You pay taxes on the front end, so when you take it out you won’t be taxed.

In both options your money will grow tax free while in the account.

Other differences:

There are income limits for a Roth IRA.

Roth IRA’s can be a bit more flexible if you need to take out money early.

With a traditional IRA, you have to start taking out money by the time you are 70 1/2 (with a Roth you can leave it in to grow).

Still not sure which to choose? Our favorite finance guru Suze Orman has advice here.
Photo courtesy of Bokeh Burger.

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