3 Key Differences Between Traditional and Roth IRAs You Need to Know

There are such things as good and bad retirement accounts, but which is which often depends on your personal situation. Take traditional and Roth IRAs, for example. They're similar in a lot of ways, but one of them is probably going to offer you better tax advantages than the other. Here's a closer look at some of the key differences between the two accounts so you can decide which one deserves your money.

The biggest difference between traditional and Roth IRAs is that traditional IRAs use pre-tax dollars, while Roth IRAs use after-tax dollars. That means traditional IRA contributions reduce your taxable income for the year, while you owe taxes on your Roth IRA contributions. But when it's time to withdraw funds, things flip. You can take your Roth funds out tax-free, but the government demands a cut of your traditional IRA withdrawals. 

Image source: Getty Images.

Continue reading

Source Fool.com