What is the difference between a savings account and a Roth IRA?


A savings account is typically a generic term for any account that a person uses to accumulate funds for a future goal such as retirement, education or home purchase.

A Roth IRA is type of savings account that allows a person to save funds for a future goal but with a twist.  The earnings and growth on the savings are not taxed if they are withdrawn within certain guidelines.  The Roth IRA is an excellent savings account vehicle for anyone who qualifies to contribute to a Roth IRA. The first qualification is that you have earned income.  That is, income that comes from a job as opposed to an investment or pension.  The second qualification is that you do not make too much money. Check with a Federal Income Tax reference guide to see what the income limitations are for any year you are deciding to contribute.