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What is the difference between a Roth IRA and a traditional IRA?
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The primary difference between a Roth IRA and a traditional IRA is the way they are taxed. Contributions to a traditional IRA are made with pre-tax dollars, meaning the contribution is not taxed until it is withdrawn. With a Roth IRA, contributions are made with after-tax dollars, meaning contributions are taxed now and not upon withdrawal. In addition, withdrawals from Roth IRAs are tax-free if certain conditions are met, whereas withdrawals from a traditional IRA are taxed at the prevailing income tax rate.