Both a Roth IRA and Traditional IRA (Individual Retirement Account) can potentially help meet your retirement savings goals. The main difference between the two is: with a Roth IRA, taxes are paid upfront, whereas contributions to a Traditional IRA are made “pre-tax,” and reduce taxable income for the year.
Age and income are two significant factors to consider when choosing a Roth or Traditional IRA. Couples or individuals in a low tax bracket as well as younger people may be better off with a Roth. Earnings grow tax-free, and contributions can be withdrawn at any time without penalty. Individuals or couples in a higher tax bracket may choose a Traditional IRA to reduce their taxable income, or because their income is too high to qualify for a Roth. A Traditional IRA is also a good choice for people who expect to be in a lower tax bracket during retirement.
