So let's say you're eligible for both a traditional IRA and a Roth IRA. Which should you choose?

Choose a Roth IRA if you can do without the tax break right now. It's a more flexible instrument, because:

1. It allows you to withdraw your contributions at any time, penalty- and tax-free.
2. You do not have to take mandatory distributions at age 70 1/2.

Choose a traditional IRA if you need that tax deduction right now, or you anticipate paying taxes at a significantly lower rate in retirement.

We should also point out that there is a traditional nondeductible IRA, but you won't realize tax benefits comparable to those available through Roth or traditional tax-deductible IRAs. However, if your income prohibits you from making contributions to the other IRAs, a traditional nondeductible IRA is still attractive because of the tax-deferred growth.

Once you've solved the "traditional vs. Roth" dilemma, there's just one thing left to do: Open an account.

If you want to find out even more on the whys and wherefores of Roth versus traditional IRAs, we have an entire IRA area at your disposal.