An individual retirement account (IRA) offers tax benefits that can help you save the money you’ll need for your retirement. IRAs come in two versions:
- Traditional IRA. Invest aftertax money (may be deductible when filing taxes); defer taxes on earnings until withdrawal, usually during retirement.
- Roth IRA. Invest after-tax money; withdrawal of earnings and contributions are tax-free, if conditions are met. Both choices offer significant tax advantages and investment compounding potential, giving you the flexibility to make withdrawals during retirement as tax rates rise or fall.