The primary differences between Roth IRA accounts and traditional IRA plans are (1) when tax is due on the money invested and (2) taxation applicable to the interest earned on the funds. Traditional IRA accounts are tax-deferred investments, and Roth IRAs are not. 

With a traditional IRA, you can deposit pre-tax money into the account, meaning that instead of paying income tax on the money now, income tax becomes payable only at the time you withdraw funds from the account. These funds are taxed as ordinary income rather than as capital gains. With a Roth IRA, the money you invest goes into the account post-tax. That means that you are investing post-tax money rather than pre-tax money with a Roth account.

With a traditional IRA, all of the interest earned on the account during the years the money is invested is taxed as capital gains as the investor withdraws funds for retirement income. The Roth IRA is tax-exempt investment. With a Roth IRA, however, there are no taxes on the gains for the investor or his or her beneficiaries. This benefit of the Roth IRA accounts can result in a significant benefit in terms of cash flow during the retirement years.

Roth IRAs are not subject to the minimum required distribution rule that applies to traditional IRA accounts. It’s possible for retirees to allow their Roth accounts to continue accruing tax-free interest for as long as they wish.

Roth IRAs are also a good investment for individuals who are thinking about retiring early. It is much easier to withdraw money before reaching the age of 59 1/2 with a Roth account than with a traditional IRA.

As an added advantage to retirees, interest earned on a Roth IRA is not used in the calculation that determines whether or not social security benefits are taxable. Investors who wish to reduce their tax bills post-retirement, rather than enjoying the benefits of a tax-deferred investment today, should definitely consider investing in a Roth IRA.