• An individual retirement account (IRA) is one of many investment products used to build retirement savings. Both traditional and Roth IRA accounts provide a means for money to earn interest and certain tax protections at the same time. There are important things to know before opening either type of IRA.
  
  

Tax Guidelines

• Investors can take advantage of traditional IRAs through an employer-sponsored plan or they can open an account on their own. Employer-sponsored accounts carry a non-tax deductible status since accounts are funded with pre-tax dollars. However, non-employer sponsored accounts are tax deductible. The money earned from the account is tax-free as long as it remains in the account. Roth IRA's are typically opened on an individual basis using after-tax dollars. Any money that the account earns is tax-free, however, none of it is tax deductible, according to SmartMoney, an investment reference site.
  
  

Contribution Requirements

• Traditional and Roth IRAs differ in terms of how much a person can contribute on a yearly basis. According to the Internal Revenue Service (IRS), traditional IRA accounts are limited to $5,000 a year for individuals under 50 years old and $6,000 for individuals 50 years old and older. Annual contribution limits for Roth IRAs are $5,000 for individuals under 50 years of age and $6,000 for married couples under 50. Limitations for the over-50 investor are $6,000 per year for singles and $12,000 a year for married couples. Roth IRA income limits also exist in terms of how much an individual or couple earns per year. As of 2010, Internal Revenue Service guidelines state individuals with yearly adjusted gross incomes between $105,000 and $119,999 cannot contribute to a Roth IRA account. This same rule applies for married couples with adjusted gross incomes between $166,000 and $175,999.
  
  

Withdrawal and Distribution Guidelines

• Withdrawal provisions differ between traditional and Roth IRAs in terms of when an account holder can withdraw money from an account without being subjected to penalties. With traditional IRAs, individuals may use the money on a tax-free basis, provided that it's repaid within 60 days. However, only one withdrawal per year is allowed. According to the IRS, traditional IRA accounts automatically require distribution amounts to be made once the owner reaches the age of 70-1/2 years old or else excise taxes are applied on the account. Minimum withdrawal amounts can vary depending on the age of the account holder as well as the life expectancy. In effect, payment distributions are designed to provide a continuous stream of income for the life of the account holder. With Roth IRAs, accounts five years or older allow for tax-free withdrawals once the owner reaches the age of 59-1/2 years old, according to SmartMoney.