Traditional IRA vs. Roth IRA

The core difference between Roth IRAs and traditional IRAs lies in the timing in which you are able to exercise your tax benefits. When you open a traditional IRA, you do not pay taxes on any amount contributed – you are taxed on future withdrawals. On the other hand, Roth IRAs allow you to make tax-free withdrawals in the future at the expense of taxation on contributions. In other words, contributions made to Roth IRAs do not decrease your end-of-year taxable income like those made to traditional IRAs.