Hello and welcome to money girls quick and dirty tips for a richer life.

Today's topic, Roth, or Regular.

A listener named Cindy called in with this question.

Hi, money girl. My name is Cindy, and I'm calling about IRAs.

My father-in-law always tells me to invest in Iraq. and I'm calling about IRAs.

My father-in-law always tells me to invest in a Roth IRA.

Rather, I would prefer investing in a traditional IRA

because I can take the tax break.

And I always figure that when I get older I'll be in a

lesser tax group than I am now so I'm wondering what's better a Roth IRA or

a traditional IRA? Thank you.

Thanks for the question, Cindy.

To start off, let's take a quick look at the differences between a Roth and a traditional IRA,

which, by the way, stands for individual retirement arrangement.

That's right, the A stands for arrangement, not account.

With a Roth you contribute after tax money,

but your earnings get to grow completely free of federal

tax which is a big benefit.

And you pay no federal tax whatsoever on withdrawals.

If you've had the Roth for five years or longer and or at least

age 59 and a half. With a traditional IRA your earnings grow tax deferred, not

tax-free, which means they're taxed at your ordinary income tax rate when you withdraw them in retirement.

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