Traditional IRAs let you deduct contributions now and pay taxes on withdrawals later. Roth IRAs take after-tax dollars upfront but grow and withdraw tax-free. The choice comes down to whether you want the tax break today or in retirement.
I want to compare the Roth IRA to a traditional IRA or the traditional 401. See, with a traditional IRA, you get a tax deduction when it goes in, still invested in whatever you want, and it grows tax-free? No, tax-deferred. Because when that money comes out, you'll pay tax. So you get a tax deduction on the way in, it grows tax-deferred, but you'll pay tax later. Now, the Roth IRA, however, you pay tax first. You take money that you've already paid taxes on, after-tax money. I want to say it 2 or 3 different ways. That after- tax money, you put it into the Roth IRA, it'll never get taxed again. You can invest it in whatever the heck you want. It grows tax-free and comes out tax-free.
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