The main difference is when you pay income taxes on the money you put in the plans. With a traditional IRA, you pay the taxes on the back end - that is, when you withdraw the money in retirement. ... With a Roth IRA, it's the exact opposite. You pay the taxes on the front end, but there are no taxes on the back end.

What are the 3 types of IRA?

2 Only the riskiest investments are off-limits. There are several types of IRAs, including traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs. Each has different rules regarding eligibility, taxation, and withdrawals. Individual taxpayers can establish traditional and Roth IRAs.

Is Roth or traditional IRA better?

Generally, you're better off in a traditional if you expect to be in a lower tax bracket when you retire. ... If you expect to be in the same or higher tax bracket when you retire, you may instead want to consider contributing to a Roth IRA, which allows you to get your tax bill settled now rather than later.