What Are the Differences Between the Traditional IRA Versus the Roth IRA?


Quick Answer

With a Roth IRA, the account holder pays taxes when the account is first opened, as opposed to paying them whenever he withdraws money from a traditional IRA, notes CNN Money. There are also income limits for Roth IRA accounts that don't apply to traditional IRAs.

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Full Answer

Roth IRA withdrawals are tax-free, while standard IRA withdrawals are taxed at the current income tax rates when those withdrawals are made at the age of retirement, notes RothIRA.com. Roth IRAs allow the account holder to start withdrawing money whenever he desires, as opposed to having no choice but to start withdrawing money by the age of 70 and a half, according to CNN Money. One similarity between the two is that both allow the account holder to save money without having to pay taxes.

Some individuals might be eligible for both types of IRAs, notes Investopedia. In this instance, it's often beneficial to add the deductible amount to the traditional IRA and the rest to the Roth IRA. When deciding how much to contribute to each account, the person should consider fees. There might be a maintenance fee for having both types of accounts, but opting for bulk trades rather than separate trades can lower trade fees.

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