Traditional vs. Roth IRAs: Which is best for you?

Put simply, there's no right or wrong answer. The type of IRA you choose depends on a number of factors. Here, we break down a few of the biggest differences between two of the most popular IRAs.

Taxes -- The biggest difference has to do with when you are taxed. Contributions to a traditional IRA are tax deductible, but withdrawals during retirement are subject to ordinary income tax rates. With a Roth IRA, on the other hand, you contribute money that has already been taxed, but earnings and withdrawals are usually tax-free. Bottom line: Do you want taxes to be applied now or during retirement?

Income eligibility --  Anyone with earned income can contribute to a traditional IRA. Those who wish to contribute to a Roth IRA, however, must meet certain income requirements.

Minimum required distributions -- Traditional IRAs are subject to MRDs beginning at age 70 1/2. There are no minimum required distributions for a Roth IRA.

One good rule of thumb: Don't put all of your retirement eggs in one basket. Take advantage of 401(k) plans, create a diversified portfolio, and make sure you have a little money in the bank, too. (You never know when that proverbial rainy day will come.)

Jeff