Financial Innovations Answers: What is the Difference Between a Traditional IRA and a Roth IRA?

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Q: What is the difference between a traditional IRA and a Roth IRA?

A: A traditional IRA allows you to invest money pre-tax, and then when you withdraw the investment, it is subject to ordinary income taxes. It is also subject to required minimum distributions. A Roth IRA allows you to invest money post-tax, and then a qualified withdrawal is subject to no taxes. They both have the same annual contribution limits. Anyone may contribute to a traditional IRA; however, a Roth IRA contribution is not allowed for those at higher income levels. Both accounts have tax-deferred growth, but the Roth IRA has tax-free qualified withdrawals. Consult an investment expert for more details.

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