Both are individual retirement plans:
Contribution Rates: (2005) $4000.00
Earned Income & other eligibility $4500.00 for age 50 & over
Several Conditions Apply
Tax Treatment: Eligible IRA contributions are deductible from your total income to arrive at adjusted gross income, reducing taxable income during the current year, and earnings on contributions accumulate tax deferred until distributed.
Eligible Roth IRA contributions are not deductible from your income currently, but earnings accumulate tax free.
Age Consideration: Traditional IRA distribution may begin after age 59 ½ and must begin at age 70 ½. An early withdrawal is subject to penalty.
Roth IRA, there is no age limit on contributions, thus Roth even after 70 ½ age can grow tax free.
Roth Advantages: Can be withdrawn tax free and without penalty provided the account has been maintained for 5 years or more and one of the following condition apply:
Existing IRAs may be rolled over to Roth IRAs, your modified income condition apply and by paying current taxes. Making investment decision will be tough and complex. Your particular situation and specific needs should be got analyzed. Please check from your financial institution or accountant for details.