Traditional vs. Roth The Motley Fool Online (01/30/02) Vol. 30, No. 2 p.1; Wolpe, David
The principle difference between traditional IRAs and Roth IRAs is that contributions to traditional IRAs are tax-deductible. In most cases, people who withdraw from a traditional IRA before age 59.5 have to pay income tax on the monies withdrawn and are subject to a 10 percent penalty. While both accounts allow wealth to accumulate without paying taxes, the traditional IRA offers tax-deferred savings, but the Roth IRA offers tax-exempt savings. Roth IRAs also afford greater flexibility because they often allow filers to withdraw their principal contributions after 5 years tax-free and without penalty.