What’s the difference between a Roth IRA and traditional IRA?
There are several differences. The main one is when you pay taxes. With a traditional IRA, you invest pre-tax dollars and defer paying income tax until you take the distributions from the account during retirement. With a Roth, you pay income tax on the dollars you’re investing now—but when you take the distributions, they’re tax-free. Other important differences have to do with the timing of your withdrawals. With either type of IRA, you need to wait until age 59 ½ to make withdrawals. But with a traditional IRA, you must begin making withdrawals at age 70 ½, or else you will face penalties. With a Roth, there is no required minimum distribution. If you don’t need the money in your Roth IRA when you’re 70 ½, you can leave it there to keep growing.
