ROTH vs Regular IRA » From: Glen Alpine, NC What is the difference between a ROTH IRA and a traditional IRA and how does it affect your tax filing? Lisa Dear Lisa, Actually, about the only things the same about them is the word IRA and the income limits at which you may contribute. Let's look at some of the primary differences: IRA ROTH You get a deduction for your contribution. Your contribution does not reduce your taxable income When you draw the money, you pay taxes on ALL the money in the account When you draw the money ALL of it is tax free to you. If you draw the money early, you pay tax and penalties on ALL the money you draw, not your contributions If you draw the money early, you only pay taxes and penalties on the earnings of the account You chose the ROTH IRA, if you are the kind of person who looks at the long view of life. You forgo the current tax savings, in anticipation of a big reward of tax-free money when you retire. Of course, that does imply a certain trust in Congress - that they won't change the rules on you before you retire. Beware, they've ruined other seniors' retirements and tax plans before! (i.e. In 1986 they eliminated the Capital Gains exclusions, with no warning. It affected everyone with an installment sale. Cut their anticipated fixed income dramatically - by at least 15% - IRS/Calif tax.) I hope this helps clear up some of your questions. Best wishes Eva Rosenberg Your TaxMama