Traditional IRA

• A traditional IRA allows you to contribute money annually up to a specific dollar amount. The contributions are tax-deductible per the regulations of the IRS. When you begin to withdraw retirement funds after a certain age, you are taxed on the funds but, since your income is likely to be lower than during your working years, it is taxed at a lower rate.
  
  

Roth IRA

• Contributions to a Roth IRA are generally not tax deductible when you make them during your working years. The advantage of the Roth account is that withdrawals are generally not taxed when made during your retirement. There is no distribution requirement for this type of account, unlike the traditional IRA.
  
  

Tax Rates

• Though there are significant decisions to be made in choosing a retirement account, the fundamental tax differences between the traditional and Roth accounts are often the deciding factor. If your tax rate will be lower in retirement, the traditional account is a good way to limit your tax exposure. If you anticipate that your tax rate will be higher in retirement, paying the taxes during your working years and investing in the Roth account might be more advantageous.