There are three types of
IRAs:
traditional
deductible IRAs,
traditional non-deductible IRAs,
and
Roth
IRAs.
All three types make it easier to accumulate retirement
savings because they give you tax breaks.
Both traditional IRAs are
tax
deferred,
which means you don’t owe income tax on
any earnings that accumulate in the account until you withdraw
money. Roth IRAs are tax
free, which means you owe no tax at all on your earnings
as they accumulate or when you withdraw, if you follow the rules
for withdrawing.
In
return for these tax advantages, you agree to leave your IRA assets
in your account until you’re at least 59 1/2. If you withdraw
before then, you may owe a penalty as well as the taxes that are
due.
