A Roth IRA is an individual retirement account with different tax advantages from the traditional IRA. The contribution limits are the same as a traditional IRA, and if you have a traditional and Roth IRA, then you still can only contribute $5000.00 a year total to both of your IRAs.
Your contributions to a Roth IRA are not tax-free. They will not reduce your taxable income. However the advantage of the Roth IRA is that your withdrawals will be made tax-free. This means that you will not have to pay taxes on the money that your Roth IRA earns over the years that you contribute to it. You will need to decide which choice is better for you in the long run, but generally paying taxes on the money now will save you as your Roth IRA grows larger over time.
You can open up your Roth IRA at either a bank or a brokerage house. You will earn more money over time if you choose mutual funds as your primary investment focus as opposed to the CDs that your bank will offer you.
