What's The Difference between a Tradtional Ira And a Roth Ira?

How is a Roth IRA different from a traditional IRA? The primary difference is that the money you put into a Roth IRA grows income tax free. Unlike a traditional IRA, the dollars you put into a Roth IRA have already been taxed. And as long as you maintain your Roth IRA account for five years all growth comes out income tax free, as long as you are at least 59 ½ before you start taking withdrawals. So with a Roth IRA you lose the tax break up front, while with a traditional IRA you are investing with pretax dollars. The larger your Roth IRA grows, the greater the potential tax benefit. The larger your traditional IRA grows the greater the potential tax. Some have said that with a Roth IRA you are taxed on the seed, where with a traditional IRA you are taxed on the harvest. Another difference between a Roth IRA and a traditional IRA is that you are allowed to take out principal before interest or growth. Another benefit is that your heirs receive your Roth IRA income tax free. Once you get past the notion that you are losing an initial tax break with a Roth IRA, there are many good reasons to choose a Roth IRA over a traditional IRA.