Why is setting up an IRA such a good deal?
Either type of IRA may help you save on taxes, depending on a number of qualifying factors. In both cases, the income from interest, dividends and capital gains grows each year, which means you make money on your contributions and their earnings.
With a Traditional IRA, your contributions may or may not be tax-deductible, but earnings are tax-deferred, which means you’ll pay no taxes on earnings until you start taking withdrawals from the account. You can make withdrawals as early as age 59 ½ without penalty and are required to start withdrawals when you reach age 70 ½.
With a Roth IRA, the contributions are not tax-deductible, but you’ll pay no taxes at all on your earnings (as long as you meet certain conditions when you withdraw the money). And with a Roth, there is no age restriction for contributing and withdrawals are not required.