There are different types of retirement accounts and they have different ways to save money, invest money, deposit money. So be sure about differences among the types of accounts and select the one which is best for you. Individual Retirement Accounts are tax advantage accounts to save you at the time of retirement.
Traditional IRA: You are allowed to save money without paying taxes until it is withdrawn by you.
Tax deductible contributions and it may depend on income level:
a. Withdraws start at age 59 ½ and are mandatory by 70 ½.
b. You pay taxes on earnings when you withdraw from IRA.
c. Money is to be used to buy a variety of investments like bonds, stocks, certificate of deposits etc.
d. No income restrictions and available to everyone.
e. If all funds are withdrawn including before 59 ½ then there is penalty to a 10%.
Roth IRA: Here there are difference in the tax advantages and it is more attractive because money can be withdrawn without federal tax payment.
a. There is no tax deductible for contributions.
b. There is no Mandatory Distribution age.
c. If rules and regulations are followed then all earnings and principal are 100 % tax free.
d. Funds may be used to buy a variety of investments such as bonds, stocks, etc.
e. This is available to single whose income is up to $ 95000 or joint income upto $1,50,000 annually.
f. Any time principal contributions can be withdrawn without penalty.