Traditional vs. Roth IRA’s

Perhaps both Traditional and Roth IRA’s can play a part in your retirement plans.

by

Jeffrey P. Kendall, CFP®

IRA’s can be an important tool in your retirement savings belt, and whichever type you choose to open, could have a significant impact on how those accounts might grow, and how you might be taxed.

Per the IRS definition, an Individual Retirement Arrangement, or IRA as we know them, is a tax-favored personal savings account, which allows you to set aside money for retirement.  There are several different types of IRA’s, including traditional IRA’s and Roth IRA’s, which are the two most common.  Traditional IRA’s, created in 1974, are owned by roughly 35.1 million U.S. households.  While Roth IRA’s, created as part of the Taxpayer Relief Act in 1997, are owned by nearly 24.9 million households.¹

Both kinds of IRA’s share many similarities, and yet, each is quite different.  Let's take a closer look.