What is the difference between a Traditional IRA and a Roth IRA?

The main differences between a Traditional IRA and Roth IRA are the eligibility requirements and the tax treatment. With a Traditional IRA, you can deposit pre-tax dollars and pay the tax upon withdrawal. With a Roth IRA, post-tax dollars are deposited into the account and the funds are not taxed during a withdrawal.

Many younger individuals select to open a Roth IRA since contributions are taxed at a time when the tax bracket is lower and the withdrawals for retirement can be made when they are likely to be in a higher tax bracket.

Alternatively, if you’re already earning a substantial income, there may be benefits from getting a tax deduction now by using a Traditional IRA. Be sure to check with a tax advisor for your specific situation.

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