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What is the difference between a Roth IRA and a Traditional IRA?

Both are individual retirement accounts with tax advantages, but the timing of the tax break differs: **Traditional IRA:** - Contributions may be **tax-deductible** (reduces taxable income now) - Growth is tax-deferred - Withdrawals in retirement are taxed as ordinary income - Required minimum distributions (RMDs) start at age 73 **Roth IRA:** - Contributions are **after-tax** (no deduction now) - Growth is tax-free - Qualified withdrawals in retirement are **completely tax-free** - No RMDs during your lifetime **Which to choose?** - Young / lower income now → Roth (pay low taxes now, withdraw tax-free later) - Peak earning years / high income now → Traditional (deduct now, pay taxes in retirement when income is lower) - Both have the same 2024 contribution limit: $7,000/year ($8,000 if 50+) Many advisors recommend having both.