Traditional Or Simple IRA

• A traditional IRA is funded with pre-tax dollars. The money is taken out of your paycheck before withholding taxes are calculated. When you receive your W-2, your taxable income will not include the funds contributed to the simple IRA. Instead, taxes will be paid when you start to withdraw money from the fund.
  
  

Roth IRA

• Contributions to a Roth IRA are made with funds that you have already paid taxes on. The contributions can come from your paycheck or any other source.
  
  

Contribution Limitations

• As of 2010, the maximum contribution limits for a simple IRA and a Roth IRA are $5,000 if you are younger than age 50 and $6,000 if you are older than age 50. Contributions to both IRA types are subject to limits based upon earned income.
  
  

Benefits of Roth IRA

• No taxes are due on the contributions or the earnings when you withdraw funds as long as you are at least 59 1/2 years old. Unlike a simple IRA, there are no mandatory distributions when you reach 70 1/2. It is possible to withdraw contributions without a penalty after a waiting period. And you can continue to contribute to a Roth IRA no matter your age.