A traditional IRA allows you to contribute pre-tax dollars, reducing your taxable income today. Your money grows tax-deferred, and withdrawals in retirement are taxed as ordinary income. A Roth IRA is funded with after-tax dollars, meaning you pay taxes now. Your money grows tax-free, and qualified withdrawals in retirement are tax-free. The right choice depends on whether you expect to be in a higher or lower tax bracket in retirement, your current income, and your overall tax strategy. Many people benefit from having both types of accounts to create tax diversification in retirement.