whats the difference between and regular ira and a roth ira?

Answer 1

Great question!

A regular IRA (Individual Retirement Account) lets you contribute money now tax-free (you get a tax break when you file your taxes during the year you contribute), then the money in your IRA will grow as the years go by, and then when you begin to take money out of your IRA (once you've reached retirement age), you will pay taxes on what you've contributed and what you've earned. So, essentially, you're deferring paying taxes on this money until you need it when you retire. Usually by that time you won't be earning much income so the tax rate won't be that great.

A Roth IRA operates a little differently. You contribute in the same way (mutual funds, stocks, etc.), but you don't get a tax break when you contribute. Instead, you contribute to your Roth IRA, watch it grow, and then when you begin taking money out of your Roth IRA, you don't pay ANY taxes on it - neither from what you put in nor from all the money that you earned as your investments went up. This is the better deal, especially if you're younger.

Both IRA's have limitations on how much you can contribute each year (usually around $3,000-$5,000), but you can still contribute for any particular calendar year up until April 15th of the following calendar year. For instance, if I'm contributing to my Roth IRA in February 2008, I can either apply it toward my limit in 2007 or 2008.

Hope this helps! Good luck!

Answer 2

Short version.
A roth is an account in which you contribute after tax dollars(tax already paid).
If you meet certain criteria in how long you leave it there and what age you take it out. You'll avoid tax on the earnings.

A traditional IRA is pre-tax, and usually more compatable with your 401k plans in terms of rolling money from plan to plan.

Answer 3

Here's the link to Roth IRA on Wikipedia:

http://en.wikipedia.org/wiki/Roth_ira

Answer 4

One is named after Roth one is not.
One is not tax deductible, one is.
One is not taxable upon withdrawal, one is.
This is way over simplified, see a tax consultant.