Traditional IRAs allow tax-deductible contributions. However, some participants are limited to making only non-deductible contributions. Your ability to deduct contributions to a Traditional IRA depends on your modified adjusted gross income. Assets placed in a Traditional IRA grow tax-deferred, meaning you don't pay taxes on earnings until they are withdrawn.
The IRS will require you to take a Required Minimum Distribution (RMD) from a Traditional IRA starting at age 72.
A Traditional IRA can also be used to receive transfers or rollovers from other IRAs or rollovers from an employer-sponsored 401(k) or 403(b) plan.
With a Roth IRA, you must pay taxes on initial contributions, but once assets are in the account, they grow tax-deferred. Withdrawals are tax-free, provided certain IRS requirements are met. There are no required distributions; therefore, money you invest will continue to grow tax-free until you choose to withdraw it. A Roth IRA can also be used to receive transfers or rollovers from other Roth IRAs, Roth 403(b) or Roth 401(k) plans. You may also convert an employer-sponsored 403(b) or 401(k) plan to a Roth IRA, but keep in mind that any amount converted is considered a taxable event.