What's the difference between a Traditional IRA and a Roth IRA?

A traditional IRA allows you to invest pretax income: you don't pay tax on your contribution when you invest it, but do pay tax when you withdraw it. The advantage of this is you can defer tax until retirement, when you'll (likely) have a lower income.

A Roth IRA is funded with after-tax dollars: you pay tax on the money you contribute. When you withdraw from a Roth IRA after the age of 59½, you don't pay any taxes on the money you withdraw, or on any earnings in your account.

Another important difference between traditional IRAs and Roth IRAs is when your money has to be withdrawn. Traditional IRAs require you to start taking withdrawals (called “required minimum distributions” or RMDs) at age 70½. Roth IRAs don't have any mandatory withdrawals, so you can keep growing your savings tax-free throughout your lifetime.

There's a lot more information about traditional and Roth IRAs, and the specific rules around contributions and withdrawals, on the IRS website.

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