Function

• Like traditional IRAs and 401ks, the Roth equivalents allow the money to grow tax free while the money is in the account, so any interest or other earnings compound tax free.
  
  

Effects

• Unlike traditional IRAs and 401ks, the money and any interest or earnings is withdrawn from the account tax free at retirement, so you do not have to include it as taxable income.
  
  

Considerations

• Roth IRAs and 401ks do not allow you to take a tax deduction for the contributions you make so if you expect to be in a lower tax bracket at retirement you may want to consider a traditional IRA or 401k rather than a Roth.
  
  

Time Frame

• The money in your Roth account cannot be taken out until you reach age 59 1/2 or meet one of the limited reasons for a qualified early withdrawal, such as disability, educational expenses and first-time home buyer expenses.
  
  

Warning

• If you withdraw the money and the interest that has accrued early, it will be subjected to a 10 percent penalty and income taxes for that year.