Regular vs. ROTH IRA

February 15, 2007

Brad O'Neil gives a clear and concise explanation of the differences between a regular and ROTH IRA:

First, a traditional IRA has the potential to grow tax deferred, while Roth IRA earnings have the potential to grow completely tax free, provided you've had your account for at least five years and you don't begin taking withdrawals until you're 59-1/2.

And second, contributions to a traditional IRA may be tax deductible (depending on your income and whether you or your spouse have access to an employer-sponsored retirement plan), while Roth IRA contributions are never deductible.

On the other hand, the traditional and Roth IRAs share some things in common. Both have the same contribution limits ($4,000 in 2007, or $5,000 in 2007 if you're 50 or older) and both can be funded annually with virtually any type of investment - stocks, bonds, Certificates of Deposit."

See also:
Ask MAX: Can I convert my regular IRA to a Roth IRA?
Ask MAX - Are Roth IRAs Too Good to be True?
Ask MAX: A Fee-Free IRA?