Traditional IRA
Is the term for a regular IRA available to individuals under age 70 ½ who have earned income (compensation from employment) and may be tax deductible depending on eligibility for an employer sponsored retirement plan and current income guidelines. Traditional IRAs require you to begin taking required minimum distributions (RMD) at age 70½.
Contributions to traditional IRAs lower your taxable income in the contribution year. That lowers your adjusted gross income, helping you qualify for other tax incentives you wouldn’t otherwise get,
Roth IRA
A Roth IRA is a special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax exempt.
Although there is no up-front tax deduction for Roth IRA contributions as there is with a Traditional IRA, Roth distributions are tax-free when you follow the rules. And because every penny you contribute to a Roth IRA is your money—not a tax-subsidized gift from Uncle Sam—you can tap your contributions (but not your earnings) any time tax-free and penalty-free.
Roth IRAs make the most sense if you expect your tax rate to be higher during retirement than your current tax rate. That makes Roth IRAs an ideal savings vehicle for young, lower-income workers who won’t miss the upfront tax deduction and who will benefit from decades of tax-free, compounded growth. Roth IRAs also appeal to anyone who wants to minimize their tax bite in retirement as well as older, wealthier taxpayers who want to leave assets to their heirs in a tax-free investment. You can contribute to a Roth IRA at any age as long as you have earned income from a job.
Advantages of an eIRA Rollover
No income taxes or penalties for a direct rollover
Your account balance fully retains its tax-deferred status
Optional low-cost professional money management
Opportunity to consolidate multiple retirement accounts
Additional contributions are allowed subject to income limitations – and can be tax deductible