What’s the difference between Traditional and Roth IRAs? An IRA or individual retirement account is a type of savings account specifically for retirement that offers certain tax benefits. There are two common types for individuals: Traditional and Roth IRAs. Watch for helpful information on specific rules to consider for each type of IRA.

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~~~Video Transcript
Title: What’s the difference between Traditional and Roth IRAs?

An IRA, or Individual retirement account, is a type of savings account specifically for retirement that offers certain tax benefits.
There are two common types for individuals—Traditional and Roth IRAs.
With either one, you can save—or contribute—up to $7,000 a year, depending on your age and income.
Traditional IRAs may let you deduct your contributions on your taxes.
But because you’re able to deduct that money now, you’ll have to pay income tax when you withdraw it during retirement. And you can’t withdraw before you’re 59 ½ without an additional tax.
Roth IRA contributions, however, aren’t tax deductible. So, while you won’t save on your taxes now, you can withdraw your Roth funds without paying income tax in the future. And as long as you meet the requirements, you can withdraw your contributions without penalty.
Each type of IRA has its own specific rules to consider, in addition to these.
Your bank or broker can help find the right account for you.
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When it comes to planning for retirement, many people turn to Individual Retirement Accounts (IRAs) as a way to save for the future. However, there are two main types of IRAs to choose from – traditional and Roth – and it’s important to understand the differences between the two in order to make an informed decision about which one is right for you.

A traditional IRA is a tax-deferred retirement savings account, meaning that contributions are made with pre-tax dollars, and the funds grow tax-free until they are withdrawn in retirement. This can provide immediate tax savings, as contributions may be deductible on your tax return for the year they are made. However, when you start to take withdrawals in retirement, the money you withdraw is taxed as ordinary income.

On the other hand, a Roth IRA is funded with after-tax dollars, meaning that contributions are not tax-deductible. However, the funds in a Roth IRA grow tax-free, and qualified withdrawals in retirement are completely tax-free. This can provide significant tax benefits in retirement, as you won’t need to pay taxes on the money you withdraw.

Another key difference between traditional and Roth IRAs is the age at which you must start taking required minimum distributions (RMDs). For a traditional IRA, you are required to start taking RMDs at age 72, while for a Roth IRA, there are no RMDs during the account holder’s lifetime. This can be an important factor to consider if you want to continue growing your retirement savings and potentially leave a larger inheritance for your heirs.

There are also income limits for contributing to a Roth IRA, which may limit high-income earners from being able to utilize this retirement savings account. On the other hand, there are no income limits for contributing to a traditional IRA, so anyone with earned income can make contributions, regardless of their income level.

Ultimately, the decision between a traditional and Roth IRA often comes down to a combination of personal financial circumstances and future tax implications. It’s important to carefully consider your current tax situation, future retirement income needs, and long-term financial goals in order to determine which type of IRA is the best fit for you.

TurboTax offers a helpful support video that further explains the differences between traditional and Roth IRAs, and provides guidance on how to choose the right retirement savings account for your individual needs. With the right knowledge and understanding, you can make a well-informed decision about how to best save for your retirement and secure your financial future.