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The most common types of IRAs are Traditional IRAs and Roth IRAs. The main difference between the two of them is when income tax is paid.

A traditional IRA permits investment of pre-tax dollars that are invested tax free until money is withdrawn or distributed, at which point it is subject to ordinary income tax.

With a Roth IRA, money is invested after tax, is invested tax free, and distributions and withdrawals are tax free.

There are also SEP and SIMPLE IRAs for use by small businesses and a Coverdell ESA (formerly known as an Education IRA) for to help fund education for young people. These IRAs are basically subject to the general IRA rules.


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