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

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

Joey Farbstein Joey Farbstein

A Traditional IRA is generally funded with pre-tax dollars; gains are tax-deferred until you take qualified distributions. A Roth IRA is always funded with post-taxed dollars; gains are tax-free when you take qualified distributions.


Here is some more information on these two IRA Types:

Traditional IRA
Funded with Pre-Tax dollars
Grows tax-deferred
Taxed once you take distributions at ordinary income level
Cash contributions are tax-deductible

Roth IRA
Funded with Post-Tax Dollars
Grows Tax-free
Must hold a Roth account for a minimum of 5 years before taking out gains or else they will not be tax-sheltered.
Can withdraw your contributions (basis) at all times