There are both opportunities and pitfalls for IRA owners, and while you definitely don’t want to get caught up in a pitfall, you may want to take advantage of the opportunities. IRAs come in two varieties: the traditional and the Roth. The traditional generally provides a tax deduction for a contribution and tax-deferred accumulation, with distributions being taxable. On the other hand, there is no tax deduction for making a Roth contribution, but the distributions are tax-free.
So, it leaves taxpayers with a significant decision, with long-term consequences of whether to contribute to traditional or Roth IRA. If you can afford to make the contributions without a tax deduction, then the Roth IRA is probably the better choice in most circumstances. However, some high-income restrictions limit the deductibility of a traditional IRA and the ability to contribute to a Roth IRA.
Pitfalls – Here are some of the pitfalls that can be encountered with IRAs: